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  • Foreign resident capital gains withholding rate variation paper application: instructions

    Vendors can use the Foreign resident capital gains withholding variation application form to apply for a reduction in the rate of foreign resident capital gains withholding on the sale of certain taxable Australian property (the asset).

    It provides the details of the vendor, the asset and the reason for a variation.

    The variation may reduce the withholding rate to nil.

    Next step:

    Lodging online is the preferred method, and the variation will be issued faster.

    See also:

    On this page:

    When to use this form

    The form needs to be completed and lodged with us as early as practical as it can take 28 days to process. The vendor will have to provide the purchaser with an ATO issued variation notice on or before the day of settlement of the asset to ensure the reduced rate of withholding applies.

    Each vendor must lodge their own application. Vendors who are parties to the same property transaction are not able to lodge joint applications.

    Note: New rules for foreign tax residents were proposed in the 2017–18 Budget to take effect from 9 May 2017. Foreign tax residents will no longer be able to claim the main residence CGT exemption when they sell property in Australia.

    Foreign tax residents who already hold property on 9 May 2017 will be able to claim the main residence CGT exemption until 30 June 2019.

    As such foreign residents will not be able to use main residence exemption as a reason for applying for a variation once it is law.

    In the meantime applications by foreign resident taxpayers who have requested variations of the withholding amount on the basis that they are disposing of their main residence will be subject to increased scrutiny, particularly where the applicant has never been an Australian resident for tax purposes.

    Who can complete and lodge

    The variation application form should be completed and lodged by a foreign resident to reduce the withholding rate below the 12.5%.

    Vendors may either complete and lodge the form themselves or have it completed and lodged on their behalf by a third party (for example, a solicitor or an accountant).

    Conveyancers, real estate agents and others charging a fee for services can't complete the form on behalf of the vendor unless they are a legal practitioner or registered tax agent.

    However, a vendor may provide a completed paper PDF version of the form to a conveyancer, real estate agent or other person charging a fee for service, who should enter the details in the online form (providing faster processing) as part of the settlement process they provide the vendor.

    Entities that are not the vendor may apply for a variation (for example, purchaser, creditor or mortgagee in possession to the asset) – they are considered the 'applicant' for the purposes of this form.

    How to complete the vendor variation paper form

    These instructions provide guidance on completing each of the sections and continue on to discuss what happens next.

    If you are unsure of how to complete this form after reading these instructions, you can phone us on 13 28 66 (fast code 4, 2).

    Sections A to F of these instructions discuss completing the sections of the form:

    Note: Mandatory fields are marked with an asterisk (*).

    Section A: Vendor details

    The vendor is the entity or entities selling the asset. Vendors and all other applicants will need to complete this section. If there are multiple vendors on the asset, each vendor will need to complete a separate variation application (if applicable).

    Providing as much detail as possible reduces the likelihood of us having to contact the nominated contact person in section B (if completed).

    The vendor detail fields are:

    • Tax file number (TFN) – enter the vendor's TFN. While you're not required to provide the vendor's TFN, providing your TFN assists us in identifying the vendor in our records which means that we can process the application faster
    • Australian business number (ABN) – enter the vendor's ABN. While you're not required to provide the vendor's ABN, providing your ABN assists us in identifying the vendor in our records which means that we can process the application faster.
    • *Entity name in full – enter the full name of the entity. If an individual, include your first and last name.
    • *Entity type – place an X in the box that represents your entity type. The entity type is the entity that has the obligation to declare any capital gain that arises (if any) from the transaction in its income tax return.

    Where the asset is held on behalf of a trust or superannuation fund, then the entity that has legal title (for example, trustee) may not be the same entity as that which has the obligation to declare the capital gain on its income tax return.

    • If the entity type of the vendor is an individual then provide the individual's date of birth.
    • If the entity type of the vendor is a trust then provide the name of your trustee.
    • If the entity type is other, then provide a description of the type of entity you are. Only select other if the vendor is not an entity of one of the specified entity types.
    • Email address of the vendor. By providing an email address you are authorising us to respond to you by email. If you do not provide us with an email address then it may take longer to provide information to you.
    • *Address – the vendor's address including the suburb/town/locality, State/territory, postcode and country.

    Section B: Contact person

    If you are submitting the application as the vendor's representative, you must provide your details at this section. This allows us to contact you to resolve any issues and process the form in a timely manner.

    We will provide the contact person with a copy of the 'Foreign resident capital gains withholding variation application' decision at the same time as we provide it to the vendor.

    If you are a conveyancer who is not a legal practitioner or tax agent, you can be the contact person for the purposes of the form. However if questions are asked, we would expect that you relay these to the vendor. The vendor can then provide you with answers which you can communicate to us. Alternatively, you may ask us to contact the vendor directly.

    Enter the contact details of the person we can contact about the information provided on this form:

    • Title – select the title of the person.
    • *Last name – the last name of the person.
    • First name – the first name of the person.
    • Other given names - other names of the person.
    • Email address – the email address for the contact person. By providing an email address, you are authorising us to provide information to the contact by email. If an email address is not provided then it may take longer to provide information to the contact.
    • Phone number – the contact person's phone number including area code and country code (if the country is not Australia). Do not include brackets () or spaces in your entry.
    • *Address – the contact person's address, including the suburb/town/locality, State/territory, postcode and the country.

    Section C: Applicant details, for example, creditor

    The following information will only be requested if you're not completing this form as the Vendor in section A.

    Entities that are not the vendor may apply for a variation (for example, purchaser, creditor or mortgagee in possession to the asset) – they are considered the Applicant for the purposes of this form and must complete this section.

    The applicant details fields are:

    • *Entity name in full – enter the legal name of the entity. If an individual, include your first and last name.
    • *Entity type – place an X in the box that represents the applicant's entity type
      • If the entity type of the applicant is a trust then provide the name of your trustee.
      • If the entity type is other, then provide a description of the type of entity you are. Only select other if the vendor is not an entity of one of the specified entity types.
    • Email address – the applicant's email address. By providing an email address you are authorising us to provide information to the applicant by email. If you do not provide us with an email address then it may take longer to provide information to you.
    • *Address – the applicant's address, including the suburb/town/locality, State/territory, postcode and the country.

    Section D: Asset details

    The asset details are the details of the Australian asset that the vendor is selling or disposing of.

    If more than one asset is being sold or disposed of under the sale contract and the ownership percentages of all of the vendors involved is the same for all assets, then details of the additional assets may be provided as an attachment.

    The asset details fields are:

    • *Contract date or possible contract date – enter the date as shown on the contract of sale or disposal of the asset. If no contract is yet signed, you can enter an anticipated date.
    • *Expected settlement date – enter date settlement of the sale or disposal of the asset occurred or when you expect it to occur.
    • *What type of asset is this application in relation to? – Select the type of asset from the list. Available types of asset are membership interests, mining, quarrying or prospecting right and real estate.
    • If the Asset type is membership interest then answer the following – Name of entity in which the membership interest is held.
    • If the Asset type is mining, quarrying or prospecting right then answer the following – Tenement registration number. Enter the tenement registration number of the mining, quarrying or prospecting right of the asset.
    • If the Asset type is real estate then answer the following
      • Real estate – the street address of the property that is being sold or disposed of.
      • Tenancy – enter the applicable tenancy type: tenants in common, joint ownership, sole ownership or tenancy inter se.
    • *Percentage of asset ownership – this is the percentage of the asset that the vendor legally owns.

    Section E: Variation details

    The variation details are the details related to the entity or entities seeking the variation.

    • *Select each of the reasons for a variation. You can select more than one reason.
    • *Reduced rate of withholding requested (percentage) – enter the reduced rate of withholding that you believe should apply.
    • *Expected sale price or market value – enter the sale price or the market value of the asset (in $AUD) proposing to be sold or disposed of in Australian dollars.
    • The following fields provides the cost base of the asset to be sold
      • *acquisition costs – enter the asset's purchase price
      • incidental costs
      • ownership costs
      • improvement costs
      • costs incurred to establish, preserve or defend title.
    • Capital gains tax discount you are entitled to (provide details of the discount % calculation in an attachment below) – enter the capital gains tax discount you are entitled to because you have held the asset for more than 12 months.

    See also:

    Note: Be sure to include evidence outlining the reasons for the reduction in the withholding rate and a brief justification as to why it applies.

    Main residence exemption

    New rules for foreign tax residents were proposed in the 2017–18 Budget to take effect from 9 May 2017. If it becomes law, foreign tax residents will no longer be able to claim the main residence CGT exemption when they sell property in Australia.

    Foreign tax residents who already hold property on 9 May 2017 will be able to claim the main residence CGT exemption until 30 June 2019.

    As such foreign residents may not be able to use main residence exemption as a reason for applying for a variation.

    In the meantime applications by foreign resident taxpayers who have requested variations of the withholding amount on the basis that they are disposing of their main residence will be subject to increased scrutiny, particularly where the applicant has never been an Australian resident for tax purposes.

    If a person has always been a foreign resident it is unlikely they have ever resided in the property as their main residence and are unlikely to meet the current requirements for the exemption.

    See also:

    Supporting information

    The following information will help you understand what we will be looking for in support of your variation application.

    For a main residence exemption, we need you to provide us with:

    • the period (or periods) that you, your spouse or your minor children were actually living at the property and supporting evidence
    • the reasons you believe the property was your main residence
    • evidence that you moved to it at settlement or as soon as practicable afterwards
    • your intention when purchasing the property, and whether this intention had changed at any stage throughout your ownership of the property
    • the contract date for your purchase of the property
    • your residency status at contract date for the sale of the property
    • the periods you are claiming the property as your main residence under the absence provisions
    • details about where you lived during the period you are claiming the main residence exemption under the absence provisions
    • details of any other property owned by yourself or your spouse in Australia and overseas during the period you are claiming the main residence exemption

    If your variation request:

    • involves transactions with related parties in any way, explain why the market value substitution rules would not apply or provide the valuations used in your calculations
    • is based on a market value of the property at a particular date, we need a copy of the valuation and the valuation report to consider your application. The report should include
      • an explanation of the method used
      • the reason that particular method was chosen
      • the qualifications and experience of the valuer
    • is based on a rollover we need you to detail the rollover provision(s) being used and to set out how you meet every legislative requirement to qualify for the rollover(s). If you have the supporting documents, please supply them with a signed statement that the requirements will be met
    • involves carry forward losses and
      • they are used to determine the withholding amount, we will need to see evidence and a statement signed by the vendor saying that after the end of the current financial year they  
        • will still have sufficient capital losses and/or revenue losses carried forward to offset the capital gain they will make on the sale of the property as claimed in the variation request
        • are not aware of any other potential transactions during the current financial year that would change this position
      • the vendor has lodged their previous years' tax returns and CGT schedules, these carry forward losses should already be recorded so that they can refer to them
      • there is a revenue loss, we would also want to see at least the year-to-date accounts (for example, the management accounts) showing the expected position for the full income year to confirm that the revenue losses would be available to offset any capital gains
       
    • is based on the cost base of the property, we will require a detailed calculation of the cost base.

    Section F: *Declaration

    Complete the declaration section of the form.

    Lodging your application

    Lodge your application with us by email, post or fax outlined on the form.

    Ensure you attach the documentation requested.

    What happens next

    We will process the application and notify you of the outcome. If required, we may contact you to resolve or clarify information to ensure the application can be processed.

    If we issue you a variation notice, you must provide the purchaser with a copy of the notice on or before settlement.

    Last modified: 21 May 2018QC 48983