In the May budget, the Federal Government announced that purchases of real property (real estate) for $750,000 or more must remit 10% of the purchase price to the Australian Taxation Office (ATO) at settlement.
However there are two exceptions to this requirement:
- If the owner of the property produces a “Clearance Certificate”, the purchaser need not remit the 10% to the tax office. This certificate is easily obtainable by an Australian resident taxpayer upon application to the taxation office.
- If the transfer is between spouses (whether you are married or in a de facto relationship, either the same or different sex) and is pursuant to the family Law Act (or under a state law, territory law or foreign law relating to the breakdown of relationships between spouses).
Implications for family law clients with property settlements
Family Law clients should consider the following:
- If you are purchasing property for more than $750,000 you should be aware of these provisions and obtain the necessary Clearance Certificate.
- If there is a transfer between you and your spouse of property worth $750,000 or more, you need to report the transaction to your accountant and advise that the exemption is claimed as a result of the breakdown of a relationship and pursuant to an Order, Agreement or award. If you have a Court Order regarding the transfer of the said property, or a Financial Agreement, there is no need to apply direct to the ATO for an exemption.
This is yet another good reason why parties should have their property settlement ratified by either the Court or a private Financial Agreement that is binding. To claim the exemption it is necessary for the transfer between spouses to be “as a result of the Order, Agreement or Award”.
For example, if you are transferring a property valued at $800,000 as part of your property settlement, and this is not ratified by a Court Order or a Financial Agreement, you may have to remit 10% of the value of the property (being $80,000) to the Australian taxation office.
All the more reason to formalise any property settlement by way of Court Orders, and or a Financial Agreement.