Foreign resident capital gains tax changes
On the 25 February 2016, the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Act 2015 (Cth) recieved Royal Assent. Schedule 2 of this bill introduces a new collection mechanism to support the operation of Australia's foreign capital gains tax (CGT) regime that will apply to regulated contracts entered into on or after 1 July 2016. The Australian Tax Office (ATO) has indicated that voluntary compliance with Australia's foreign resident CGT regime has been poor. In the new regime, when a foreign resident disposes of certain taxable Australian property, the purchaser will be required to withhold and pay to the ATO 10 per cent of the proceeds from the sale. The purpose of the regime is to assist in the collection of foreign residents' CGT liabilities. However, there are concerns that the legal profession has had insufficient time to upload relevant transaction documents and the proposed tax measure will not just adversely affect purchasers, but vendors and the property market as well. For more information and the full paper on this issue, please contact the Law Council’s Legal Practice Section. T: +61 2 6246 3788.