In brief - What this means for developers
In the recent Federal Budget, changes to the threshold at which a clearance certificate is required and the amount to be remitted to the Australian Taxation Office
(ATO) if no certificate is produced were announced. Developers should be aware that the clearance certificate is valid for any property sold in the 12 months from date of issue, and that an updated certificate must be applied for in the event that a project is delayed.
Changes to clearance certificate regime will take effect from 1 July 2017
The Federal Government has a regime whereby vendors of real estate in excess of $2 million have to provide purchasers with a clearance certificate on or prior to settlement or purchasers are mandated to retain and remit to the (ATO) 10% of the price.
By virtue of announcements in the Federal Budget, this regime will change from 1 July 2017 in two respects:
- the threshold at which a certificate is required will be reduced to $750,000
- the amount to be retained if a certificate is not produced and remitted to the ATO is now 12.5% of the price
Clearance certificate issued by ATO is valid for any and all properties sold in the 12 month period
For developers who have multiple property holdings, the ATO has confirmed that an application can be made on behalf of an entity with an anticipated settlement date for any property. Once the clearance certificate has issued, the certificate is valid for 12 months for all properties sold in that 12 month period.
Usually the certificate issues within five business days, but if further enquiries need to be undertaken by the ATO (for example where the applicant's tax details or records are not complete or in order), it can take up to one month.
Developers may want to consider seeking legal assistance when lodging clearance certificate application
Developers may benefit from asking their lawyer to lodge their completed application with the ATO on their behalf. You will then have a clearance certificate which can be annexed to your sale contracts which are likely to settle within the next 12 months.
If there is a delay with any project, then you would have to apply for an updated certificate. However, this would cover all your projects current at the time you applied for the updated certificate.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.