{"id":8289,"date":"2016-06-21T01:00:57","date_gmt":"2016-06-20T15:00:57","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=8289"},"modified":"2016-06-21T01:00:57","modified_gmt":"2016-06-20T15:00:57","slug":"another-shock-for-australian-property-markets","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/another-shock-for-australian-property-markets\/","title":{"rendered":"Another shock for Australian property markets – Michael Yardney"},"content":{"rendered":"

 
\nMichael Yardney<\/a>,\u00a0<\/strong>from Metropole Property Strategists, tells us about a little known fact that will deal another shock for Australian property markets.<\/b>
\n <\/p>\n

Transcript:<\/strong><\/h4>\n

Kevin:<\/b>\u00a0 My next interview surprised me when I found out about it. I\u2019m sure it\u2019s going to surprise you, too. Not many people realize that at a time when Australian property markets have enough to contend with, with falling pre-election consumer confidence, foreign buyers pulling out of markets \u2013 and I read a staggering story today that Chinese buyers are now looking at taking money away from Australia and starting to invest in the USA \u2013 banks make it harder to get finance.
\nNow the Australian Taxation Office has delivered another blow for those dealing with properties valued at more than $2 million. You might think it\u2019s for foreign buyers only, but stand by because this is going to impact anyone who is buying and selling a property that\u2019s in excess of $2 million.
\nLet\u2019s have a look at what this really means and we\u2019ll explore it in a little more detail. Michael Yardney from Metropole Property Strategists joins us.
\nMichael, thanks for drawing this to my attention. I understand you\u2019ve only just been told about this by your solicitors, as well.
\nMichael:<\/b>\u00a0 That\u2019s right. It was actually first mentioned a number of years ago by former Treasurer Joe Hockey, and it came into our active parliament in February this year. But it\u2019s actually been kept quiet, and I bet there will be a bit more news about it because as of July 1st<\/sup>, everyone in Australia is going to be deemed a foreign resident when they sell their property unless they get a tax certificate saying they\u2019re not.
\nKevin:<\/b>\u00a0 This is every person who is selling a property over $2 million, or just everyone?
\nMichael:<\/b>\u00a0 The rules say as follows: that everybody who is selling a property \u2013 and property is not just real estate but it includes leaseholds and a number of other assets, not shares on the stock exchange \u2013 is deemed a foreign resident and withholding tax will have to be held back unless certain elements apply. One of them is, yes, the property has to be worth more than $2 million. So it will change the way large property transactions occur.
\nKevin:<\/b>\u00a0 What is the purpose behind this? Is it trying to capture overseas buyers?
\nMichael:<\/b>\u00a0 Clearly, the Australian Tax Office is concerned that foreign buyers were purchasing and then selling Australian property, including real estate, and then taking the proceeds overseas without paying the appropriate tax. Now it has transferred some of the responsibility for collecting a portion of that capital gains tax to buyers, to purchasers, of Australian real estate rather than purely leaving it up to the sellers to be open and declare it.
\nKevin:<\/b>\u00a0 Let\u2019s walk through this. Let\u2019s paint a scenario here where I had \u2013 I wish \u2013 a property over $2 million to sell and I was going to sell it to you. What does the transaction look like?
\nMichael:<\/b>\u00a0 You\u2019re classified as an overseas investor, which means that you have to then go to the tax office, go to their website, and you can get a special tax clearance. To be honest, most Australian residents won\u2019t have any difficulty getting that for one of two reasons.
\nFirst of all, it won\u2019t apply to most people because most transactions aren\u2019t $2 million. But anything over that, whether it\u2019s residential or commercial, you have to apply for a tax clearance. Most people will be able to get it and say, \u201cI am not a foreign resident.\u201d This means then that there won\u2019t be a tax withheld, but it may bring you to the attention of the tax department when may you don\u2019t want them to know about you.
\nKevin:<\/b>\u00a0 Let\u2019s go back to the scenario where I am a seller of, say, a $2.1 million property. I put it on the market. You come across and you\u2019re a Chinese buyer. You\u2019re a foreign investor and you\u2019re going to buy it. Does that mean that, as the seller, I\u2019ll actually have to either add 10% to my purchase price or have to cop a 10% loss?
\nMichael:<\/b>\u00a0 No. Kevin, whether you\u2019re a foreign purchaser or an Australian resident purchasing the property, you have to request from the seller a clearance certificate saying no tax is payable, no capital gains tax is payable. If it is your primary place of residence, and that\u2019s the most likely scenario \u2013 those nice, big homes in the good suburbs \u2013 then you don\u2019t have to pay tax because you are exempt of tax.
\nOn the other hand, if tax is payable because you\u2019re a property developer or you\u2019re in the business of property or it\u2019s an investment you bought a few years ago and there is capital gains tax, then you may not get a clearance certificate because it will be clear that an element of tax is payable, and either as the seller, you\u2019re going to have to pay it or the purchaser won\u2019t give you your $2.1 million; they\u2019ll actually give you $210,000 less because they\u2019re going to have to give $210,000, 10%, to the tax department just in case you don\u2019t pay your tax.
\nKevin:<\/b>\u00a0 This is really an exercise to capture foreign buyers who will then become sellers of that same property.
\nMichael:<\/b>\u00a0 In one regard, it is. It\u2019s also to capture Australians who maybe haven\u2019t filed tax returns for a while. There are lots of people who do buy, sell, develop their homes. Actually, I know people who build a nice, modern home every couple of years, on-sell it, upgrade, and do another one.
\nBecause they use their principal place of residence exclusion so that they don\u2019t have to pay capital gains tax, they often get away with that. That\u2019s fine. It\u2019s within the law. But if you do it too often, you could be deemed a developer. Those people could fall foul of this particular law, also. Also, it could be if you actually sell your $2 million house and maybe you don\u2019t have a tax return that shows you could afford it.
\nThe bottom line really is be aware, speak to your solicitor when you\u2019re about to buy or sell a house, just make sure you do everything that complies, and as long as you\u2019ve done everything correctly and legally tax-wise, there\u2019s nothing to worry about.
\nKevin:<\/b>\u00a0 This comes into effect on July 1 of this year.
\nMichael:<\/b>\u00a0 Yes, the day before the election, Kevin.
\nKevin:<\/b>\u00a0 That\u2019s interesting, isn\u2019t it? That couldn\u2019t have been planned that way.
\nMichael:<\/b>\u00a0 No, it wasn\u2019t because it was actually put in as an Act of Parliament in February of this year.
\nKevin:<\/b>\u00a0 The bottom line is make sure that all of your I\u2019s are dotted and your T\u2019s are crossed. Consult with your solicitor, I guess, is the message.
\nMichael:<\/b>\u00a0 Yes. Just to make things clear, I have no issue with the Australian Tax Office collecting taxes due to it, especially if it\u2019s money owed to the Australian system and it\u2019s being funneled offshore.
\nKevin:<\/b>\u00a0 Good talking to you, Michael Yardney from Metropole Property Strategists.
\nThanks, Michael.
\nMichael:<\/b>\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Michael Yardney,\u00a0from Metropole Property Strategists, tells us about a little known fact that will deal another shock for Australian property markets.   Transcript: Kevin:\u00a0 My next interview surprised me when I found out about it. I\u2019m sure it\u2019s going to surprise you, too. Not…<\/p>\n","protected":false},"author":176692471,"featured_media":8290,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,13,36,23,25,27],"tags":[101],"class_list":["post-8289","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-property-investment-topic","category-selling-a-property-topic","category-sponsored-channels","category-trends-topic","tag-podcast"],"yoast_head":"\nAnother shock for Australian property markets - Michael Yardney - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/another-shock-for-australian-property-markets\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Another shock for Australian property markets - Michael Yardney - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Michael Yardney,\u00a0from Metropole Property Strategists, tells us about a little known fact that will deal another shock for Australian property markets.   Transcript: Kevin:\u00a0 My next interview surprised me when I found out about it. 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