Queensland Law Society

ATO updates CGT withholding framework information

The Deputy Commissioner of Taxation has released Variation 48, ‘PAYG Withholding variation for foreign resident capital gains withholding payments – deceased estates and legal personal representatives’.

The effect of the instrument is to vary to ‘nil’ the amount that would otherwise be required to be paid to the Commissioner of Taxation by a deceased’s legal personal representative, beneficiaries of a deceased estate or surviving joint tenants who acquire a deceased joint tenant’s interest in a relevant asset. The Explanatory Statement for Variation 48 is available here.

The ATO has also provided QLS with the following message and updated information for the profession:

As the ATO continues to administer the foreign resident capital gains withholding measure we would like to thank members for the contribution they have made. One conveyancer has informed us he regards “the certificate process as entirely beneficial and good for Australian taxation revenue”.

We have received a number of questions regarding the certificates and so provide the following information to assist.

Does the name on the certificate need to reflect the name on the title exactly?

Yes – however there are two exceptions.

The name the certificate is issued under for individuals is the name our system uses for all notices First Name – Initial (if any) – Last Name. The ATO accepts that vendors have fulfilled their obligation if they have sighted a Certificate where the First Name, Initial and Last Name are consistent with the name on the title.

The obligation has also been met where a name has changed from the time the title was registered and the issuing of the certificate if documentation has been presented by the vendor to the purchaser such as marriage certificates, Family Court orders or change of name by Deed Poll and the purchaser retains copies of those documents.

Is a match of honorific required?

No – a match of honorific is not required to fulfil the purchaser’s obligations.

Is the correct address required on the certificate?

No – a correct address on a certificate is not required to fulfil the purchaser’s obligations. You will notice the representative’s copy of the certificate does not have the vendor’s address, whereas the vendor’s copy currently does.

While we have been re-issuing certificates in some of these circumstances we are no longer reissuing certificates for these reasons.

Also remember lodging the application online is the best method – it is always going to be quicker than faxing or posting the application.

Clearance certificates and the period covering the time the transaction is entered into:

Pursuant to subsection 14-210 of Schedule 1 to the TAA 1953, a purchaser may technically rely on a clearance certificate issued under section 14-220 where:

  1. the period specified in the clearance certificate covers ‘the time the transaction is entered into’, and
  2. the certificate is provided to the purchaser before an amount is paid to the commissioner (for example, before settlement).

The phrase ‘the time the transaction is entered into’ can be read as ‘the date the contract is exchanged’ and it is not necessary that the time period covered by the clearance certificate covers the completion date.

In addition to technically relying on clearance certificates in the circumstances set out above, the ATO has developed an administrative approach to ensure that vendors can apply for clearance certificates after the date the transaction has been entered into. Under this approach a purchaser may rely on a clearance certificate where:

  1. the date the certificate is provided to the purchaser falls within the 12-month period specified in the clearance certificate, and
  2. the clearance certificate was provided to the purchaser prior to the date the purchaser became the owner of the asset (for example, settlement).

This administrative approach was developed to alleviate difficulties that may be faced by vendors selling at auction who did not know before exchange that their transaction would be subject to the withholding requirements. This approach also recognises that the measure is newly enacted and that vendors may not be aware of the legal requirement at contract date.

For more information, see ato.gov.au/FRCGW, which includes a link to the online forms.