Certain Australian Government authorities can exercise powers under state and territory legislation for the compulsory acquisition of property. Generally, a property is acquired and ownership of the property passes, on the date that the acquisition is published in the relevant government gazette.
For a compulsory acquisition, issues arise around:
- determining whether there's an obligation to withhold
- working out the withholding amount to be paid on or before the day the acquisition is published in the gazette.
For example, the market value of the property being acquired may be the subject of a dispute at the time the acquisition is published.
Payment of withholding tax
Under section 14-200 of Schedule 1 to the Tax Administration Act 1953, the Australian Government authority must pay the foreign resident capital gains withholding tax on or before the date that the authority became the property’s owner.
Deferral of payment
Subsection 255-10(2A) of Schedule 1 of the Taxation Administration Act 1953 allows the Commissioner to defer the time for payment of tax-related liabilities due (including withholding tax) and payable by a class of taxpayers.
The Commissioner:
- defers the payment by publishing a notice on our website
- can defer the time for payment whether or not the liability has already arisen.
Notice
Until further notice, the Commissioner of Taxation has deferred the time the foreign resident capital gains withholding tax liabilities of an Australian Government authority are due and payable.
The exercise of the compulsory acquisition power is authorised under one or more of the following Acts:
- Acquisition of Land Act 1967 (Queensland)
- Land Acquisition (Just Terms Compensation) Act 1991 (New South Wales)
- Land Acquisition Act 1969 (South Australia)
- The Land Acquisition and Compensation Act 1986 (Victoria)
- Land Acquisition Act 1993 (Tasmania)
- Land Administration Act 1997 (Western Australia)
- Land Acquisition Act 1994 (Australian Capital Territory)
- Land Acquisition Act 1978 (Northern Territory)
- Land Acquisition Act 1989 (Commonwealth of Australia).
For an Australian Government authority that is exercising its compulsory acquisition powers under one or more of the above Acts in relation to a compulsory acquisition, the due date for payment of the foreign resident capital gains withholding tax is deferred to the earlier of:
- 14 days after agreement or final determination of the compensation payable
- 14 days after agreement to pay an advance amount of compensation.
We'll accept the government authority as meeting its obligation for the purposes of the withholding if it receives a valid clearance certificate from the vendor by the earlier of:
- 14 days after agreement or final determination of the compensation payable
- 14 days after agreement to pay an advance amount of compensation.
In terms of the amount of withholding, it will be based on the compensation amount paid that is equivalent to the first element of the CGT asset cost base (the taxable Australian real property subject to the gazettal).
The government authority will establish a market value break-up of the payment related to the property, and only withholding on that amount. This is because a compensation amount could include a value for disturbance and professional expenses or other assets other than the property.