• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 7/30/2013

Australia - Withholding on real property disposals by foreign residents 

July 30: Australia’s government has proposed a non-final withholding tax when a foreign resident disposes of Australian real property interests, whether or not the interest is held on revenue or capital account.

Under the proposal (which would be effective 1 July 2016), the purchaser would be required to withhold and remit 10% of the proceeds from the sale.

The withholding regime would not apply to residential property transactions valued under AUS $2.5 million.


Currently, when a foreign resident disposes of an interest in Australian real property, a gain from the disposal is subject to tax in Australia on an assessment basis.

In recent cases, the Australian Taxation Office (ATO) has been willing to seek orders from the Federal Court freezing the Australian assets of a foreign entity if a “debt” owed to the ATO is believed to be unsatisfied because the assets of the debtor (or another person) will either be removed from Australia or disposed of, dealt with, or diminished in value. However, as the Federal Court has described it, this collection mechanism is “draconian.”

Collection mechanism

The proposal focuses on the collection mechanism—as opposed to whether or not a particular gain would be assessed. That is, once an assessment is made and a tax liability has been determined under the tax law, the new withholding system would apply to collect the tax.

Read a July 2013 report prepared by the KPMG member firm in Australia: Australian real property interests: foreign resident withholding regime proposed

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