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  • Variations

    Vendors can apply for a variation where:

    • they're not entitled to a clearance certificate
    • a vendor’s declaration is not appropriate
    • 12.5% withholding is too high compared to the actual Australian tax liability on the sale of the asset.

    Reasons for a variation include:

    • the vendor will not make a capital gain on the transaction (for example, because they will make a capital loss or a CGT roll-over applies)
    • the vendor will not have an income tax liability (for example, because of carried-forward capital losses or tax losses)
    • a creditor of the vendor has a mortgage or other security interest over the property, and the proceeds of sale available at settlement are insufficient to cover both the amount to be withheld and to discharge the debt the property secures
    • a creditor acquires legal title to the property (that is, becomes the purchaser) as a result of an order for foreclosure, and its security would be further diminished as a result of having to comply with the withholding obligation.

    See also:

    Foreign residents claiming the main residence exemption as a reason for the variation

    A recent law change means foreign residents can no longer claim the CGT main residence exemption as the reason for their variation unless, at the time of the CGT event, they were a foreign resident continuously for six years or less and during that time one of the following occurred:

    • either the foreign resident, their spouse, or their child under 18, had a terminal medical condition
    • their spouse, or their child who was under 18 years of age, dies
    • the CGT event happened because of a formal agreement following your divorce or relationship breakdown.

    If the foreign resident dies, the change also applies to:

    • legal representatives, trustees and beneficiaries of deceased estates
    • surviving joint tenants
    • special disability trusts

    This change passed into law on 12 December 2019.

    When the change applies

    The change applies to foreign resident vendors as follows:

    • For properties held before 7:30pm (AEST) on 9 May 2017, the CGT main residence exemption can only be claimed for disposals that happen up until 30 June 2020, provided they satisfy the other requirements for the exemption. However, for disposals of these properties that happen from 1 July 2020, at the time of the CGT event, they are no longer entitled to the exemption unless any of the life events (listed above) occur within six continuous years of that individual becoming a foreign resident for tax purposes.
    • For properties acquired at or after 7:30pm (AEST) 9 May 2017, the CGT main residence exemption no longer applies to disposals from that date unless any of the life events (listed above) occur within six continuous years of that individual becoming a foreign resident for tax purposes.

    The change only applies if the person is not an Australian resident for tax purposes at the time of the disposal, that is, when the person signs the contract to sell the property. Their residency status in earlier income years will not be relevant. There will be no partial CGT main residence exemption available in these circumstances.

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

    Legislative Instruments

    We have issued class variations for:

    If any of these class variations apply, the withholding rate is varied to nil and it is not necessary to apply for a variation.

    See also:

    How to apply

    To apply for a variation, the vendor, the vendor’s representative or vendor’s creditor needs to complete the online Variation application for foreign residents and other partiesThis link opens in a new window.

    An application for a variation should be completed well in advance of the settlement date to ensure there is enough time to provide the information required to finalise the application.

    Conveyancers, real estate agents and others charging a fee for services (but who are not legal practitioners or registered tax agents) should obtain a completed paper PDF version of the form from the vendor. They can then use the details on the paper form to complete the online form, ensuring faster processing, as part of the settlement process.

    Next step:

    See also:

    • LCR 2016/5 Foreign resident capital gains withholding regime: the Commissioner's variation power

    In the majority of cases (where we have all the required information), the variation notice will be issued within 28 days.

    Variation notices will be sent by email if an email address is provided in the application. Otherwise, notices will be mailed to the vendor and the applicant using the addresses provided in the application. The variation notice should be shown to the purchaser before settlement to ensure the reduced withholding rate applies.

    Calculating the reduced rate of withholding

    Vendors need to calculate their reduced rate of withholding. This could be a rate between nil and 12.49%.

    The varied rate we approve will depend on the information provided by the vendor in their application.

    Unit price fluctuations

    If the indirect interest in taxable Australian real property is in a wholesale trust that has unit values that fluctuate daily, then there is a risk that the variation would become invalid as the unit selling price exceeds the unit price specified in the conditions of the variation notice we issued.

    As a solution to this potential problem, the variation condition we provide on the variation notice can provide a number of alternative prices, with a differing variation rate applying to each. If you are in this situation you should provide information in relation to possible price differences and what you believe would be an appropriate variation rate within that price range – this information can be supplied in the attachment to the variation application.

    Multiple vendors

    A variation notice applies to the specified vendor and applicable asset on the notice. If an asset is acquired from multiple vendors, each vendor will need to supply the purchasers with separate variation notices if a reduced rate of withholding is to apply.

    See also:

    Valid variation notice

    A variation notice is valid up to and including the expiry date on the notice for the listed vendor and applicable asset on the notice.

    It is the vendor’s responsibility to provide the purchaser with the variation notice and ensure it's valid at the time of settlement.

    For the purchaser to rely on the variation notice, the:

    • name of the vendor and applicable asset details on the notice must match those on the certificate of title or other asset ownership documentation (proof of name change should have been provided to us at the time of applying as all variations are manually processed)
    • the settlement date must be on or before the expiry date on the variation notice.

    When a purchaser receives a valid variation notice from a vendor, they can rely on it and withhold amounts from payments at the reduced rate and pay by completing the Foreign Resident Capital Gains Withholding Purchaser Payment Notification form.

    If the variation notice doesn't meet the above conditions, the purchaser is required to withhold 12.5% of the purchase price.

    A purchaser can check the validity of a variation notice with us by phoning 13 28 66 (Fast Key Code 42) prior to deciding whether to withhold the 12.5% amount from the purchase price. To confirm the validity, the purchaser must provide the:

    • BET number from the ‘Our reference’ field at the top of the notice
    • vendor’s name, varied rate and applicable asset details as they appear on the notice.
      Last modified: 01 Mar 2021QC 48972