Gotta Catch 'Em All

The Federal Government introduced new rules that aim to catch foreign residents that dispose (i.e. sell or transfer) certain taxable Australian property. These new rules started on 1 July 2016 and apply to contracts (and various other transactions) signed after this date.

The withholding rules started with a bunch of important people sitting around a table (probably with very decent coffee and a reasonable selection sandwiches) discussing what they needed to do to ensure that when a foreign resident sells an asset the tax gets paid. Similarly, about 5 years ago, members from Niantic Labs plotted an evolutionary idea…(I would suspect that they were surrounded by very good coffee accompanied by some serious sugary stimulants) a concept to ensure that every person with a smartphone has the ability to catch Pokémon. True Pokémon enthusiasts must be feeling pretty nostalgic right now.

Once you encounter a Pokémon in the wild (at the beach, in a park or wherever it may be) you suddenly switch into ‘capture mode’ where you flick Pokeballs at the creature to catch it. As you catch it you start to build up a sweet collection of Pokémon, your training levels advance and you start to find higher level Pokémon. The fundamental concept of the game is to catch a creature (and just keep catching it).

The same concept generally applies to the capital gains tax withholding rules. When a foreign resident sells a house or an apartment or otherwise disposes of an asset, the buyer is required to withhold (or catch) an amount equal to 10% of the price and pay that amount to the Australian Taxation Office following settlement. Unfortunately though, you don’t build up stardust and candy. Wouldn’t that be nice!

It sounds pretty simple, right? Well, it starts to get tricker when the price gets to $2,000,000.00. In this situation, any person disposing of an asset is subject to the 10% withholding rules. This means that if you are selling a house or a commercial warehouse or you are purchasing an asset with a price of $2,000,000.00 or more – you need to be alive to the withholding rules whether you are selling or buying. There are some serious penalties for failing to withhold money from settlement.

The hunt is on – and not just for Pokémon.