The Law Handbook 2024

560 Section 6: Houses, communities and the road Capital gains tax withholding When foreign owners sell property, if the sale price is more than $750 000 and the vendor cannot produce a clearance certificate from the ATO, purchasers will need to withhold 12.5 per cent of the sale proceeds and remit it to the ATO. They would not be entitled to the capital gains tax main residence exemption unless they met one of the limited exceptions. Foreign trusts and stamp duty Where a discretionary trust deed does not exclude foreign beneficiaries, then the SRO automatically deems the trust to be a foreign trust. In these circumstances, the extra eight per cent land transfer duty applies. This can also apply to unit trusts where more than 50 per cent of the units are held by foreign entities (i.e. foreign residents, foreign corporations and discretionary trusts that don’t exclude foreign beneficiaries). Other trusts can also be considered to be foreign if some or all of the beneficiaries are foreign entities. A buyer should get advice from their solicitor and accountant about whether they or their purchasing entity is considered to be foreign before signing a contract. Foreign corporations and stamp duty A corporation is considered to be foreign if it is incorporated outside of Australia or more than 50 per cent of voting power/shares/potential voting power is held by a foreign entity. The extra eight per cent land transfer duty applies if a corporation is considered to be a foreign entity. Conveyancers’ duties A buyer’s conveyancer The duties of a buyer’s conveyancer include: • reviewing and advising on the contract before it is signed and recommending amendments; • advising on how the property should be owned and on stamp duty treatment; • conducting a verification of identity; • liaising with the incoming mortgagee to satisfy their requirements; • ordering and reviewing the searches and certificates needed for the statement of adjustments and comparing them against the vendor’s statement; • advising on any section 27 deposit release statement; • reviewing the GST withholding notice and capital gains tax clearance certificate; • preparing the Duties Online documentation to enable the buyer’s stamp duty to be assessed a reasonable time before settlement with regard to the type of transaction involved; • setting up an electronic conveyancing workspace; • preparing the statement of adjustments; • calculating what funds are needed for settlement and making sure that these are available from the lender and/or buyer, and directing where funds are to be transferred; and • advising the authorities of the change in ownership. A vendor’s conveyancer The duties of a vendor’s conveyancer include: • taking detailed instructions to enable preparation of the vendor’s statement and contract; • ordering the searches and certificates needed for the vendor’s statement; • preparing the vendor’s statement and contract of sale; • providing the contract to the selling agent; • conducting a verification of identity; • preparing a section 27 deposit release statement and agitating for early release of the deposit; • preparing the GST withholding notice and assisting the vendor to order a capital gains tax clearance certificate from the ATO; • initiating the Duties Online documentation to enable the buyer’s stamp duty to be assessed a reasonable time before settlement; • arranging for discharge of the vendor’s mortgages (if applicable); • reviewing the transfer, statement of adjustments and settlement statement; • directing the buyer on how the sale proceeds are to be applied; and • setting up an electronic conveyancing workspace (as required in the majority of conveyancing transactions) and coordinating settlement on the vendor’s behalf.