CGT Withholding Regime may affect rural land sales

Rural Conveyancing just got even more difficult for our Rural and Agribusiness clients. From 1 July 2016, Vendors and Purchasers of rural land could be impacted by the new Tax and Superannuation Laws Amendment Bill 2015. 

The new Capital Gains Tax (CGT) Withholding Regime was intended to target foreign sellers of land, but rural land transfers are likely to be affected. The way the new regime will work is as follows:-

Generally, if a Vendor enters into an option or contract to transfer any land or lease of Australian land, the Purchaser will be required to withhold 10% of the purchase price from the settlement funds. This money is then paid to the ATO. The funds are taken on account for the Vendor’s potential CGT liability. The new CGT Withholding Regime will apply, unless there is an exemption.

Exemptions include land or leases with a market value of less than $2,000,000.00 or where a “Clearance Certificate” has been obtained. These days, rural properties are often sold for over $2,000,000.00. It is the Purchaser’s responsibility to make sure that the CGT is withheld and so there are changes in the wind for both Buyers and Sellers.

At this stage, it is a case of “watch this CGT space”, but be aware of the impending change.