Law Companion Guideline

LCG 2016/5A1 - Addendum

Foreign resident capital gains withholding regime: the Commissioner's variation power

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Addendum

This Addendum amends Law Companion Guideline LCG 2016/5 to reflect amendments to the foreign resident capital gains withholding (FRCGW) threshold and withholding rate pursuant to Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017 (Act No. 57 of 2017). The changes will apply to contracts entered into on or after 1 July 2017:

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for real property disposals where the contract price is $750,000 and above (currently $2 million)

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the FRCGW withholding tax rate will be 12.5% (currently 10%).

The existing threshold and rate will apply for any contracts that are entered into before 1 July 2017, even if they are not due to settle until after 1 July 2017.

LCG 2016/5 is amended as follows:

Paragraph 7

(a) Omit the paragraph and footnote; substitute:

7. For transactions entered into on or after 1 July 2016 and before 1 July 2017, the amount payable to the Commissioner is 10% of the asset's purchase price, unless the Commissioner exercises the discretion under section 14-235 (the variation power) to vary the amount or classes of amounts.^[2] A withholding threshold of $2 million applies.

7A. For transactions entered into on or after 1 July 2017 the withholding rate is 12.5% and the withholding threshold is $750,000. These changes affect transactions involving TARP or indirect Australian real property interests giving rise to company title interests.6A

(b) Insert footnote 6A at the end of paragraph 7A.

6A. Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017 (Act No. 57 of 2017).

Paragraph 16

(a) Omit '10%'; substitute '12.5%'.

(b) At the end of the last sentence insert footnote 8A:

8A Applicable rate for transactions entered into on or after 1 July 2017.

3. Paragraphs 23, 27, 29, 32, 45, 57, 59 and 60

Omit all occurrences of '2016'; substitute '2017'.

4. Paragraph 31

Omit '$2 million'; substitute '$2.5 million'.

5. Paragraph 33

Omit '2017'; substitute '2018'.

6. Paragraph 38

(a) Omit '10%'; substitute '12.5%'.

(b) Insert footnote 10A:

10A Applicable rate for transactions entered into on or after 1 July 2017.

7. Paragraph 41

Omit '$10 million'; substitute '$12.5 million'.

8. Paragraph 44

Omit '2010'; substitute '2011'.

9. Paragraph 46

Omit all occurrences of '2017'; substitute '2018'.

10. Paragraph 51

(a) Omit '10%'; substitute '12.5%'.

(b) Insert footnote 13A:

13A Applicable rate for transactions entered into on or after 1 July 2017.

11. Paragraph 53

(a) In the first sentence, omit '2016'; substitute '2017'.

(b) In the second sentence omit '$320,000 (10% of $3.2 million)'; substitute '$400,000 (12.5% of $3.2 million)'.

(c) In the third sentence omit '$320,000'; substitute '$400,000'.

12. Paragraph 54

Omit from the second sentence '$120,000'; substitute '$200,000'.

This Addendum applies on and from 22 June 2017.

Commissioner of Taxation
26 June 2017

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

References

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