Fairfax is reporting today on a proposal from the Australian Treasury to make domestic buyers of foreign owned properties collect a 10% withholding tax from foreign vendors on behalf of the Australian Tax Office (ATO):
Treasury says it would like Australians to withhold 10 per cent of the sale price of a property from foreign residents and hand that money to the Australian Tax Office.
The measure will be a “collection mechanism” for the ATO to support the operation of the foreign resident capital gains tax regime.
And it will be up to you to establish whether the person you are buying the property from is a foreign resident and whether the transaction involves “Australian taxable property.”
Your decision may involve “making some enquiries in certain circumstances,” Treasury says.
And penalties may apply if you fail to do it…
To reduce compliance costs, the proposed “withholding tax” will not apply to transactions of residential property worth less than $2.5 million…
Here’s a novel idea. Instead of tying local buyers up in swathes of red tape, and forcing them to do the job of the ATO, how about the Government mandates that all foreign buyers of Australian residential property pay an additional 5% or 10% stamp duty, as applies in places like Singapore?
Such an approach would raise far more revenue for the Government than its 10% withholding scheme. It would also be less burdensome to administer.
All that needs to be done is to ensure that all purchasers of residential property in Australia provide proof of residency/citizenship, with contraventions automatically referred to both the Foreign Investment Review Board (FIRB) and the ATO for follow-up, and the certificate of title not cleared until all the necessary payments/rules have been adhered to (similar to how domestic buyers do not receive title until stamp duties are paid).
Now, I wonder why such a simple solution is being overlooked…
