New tax laws for property sales over $2 million

From July all Australian residents, buying or selling property over $2 million will need to get a clearance certificate from The Australian Taxation Office (ATO).

The ATO assistant commissioner, Malcolm Allen, said when residents were selling a taxable Australian property with a market value of $2 million or more they would need an ATO clearance certificate to confirm that 10 per cent did not need to be withheld from the transaction.

He said the seller needed to provide a clearance certificate to the buyer by settlement, or the buyer would be required to withhold ten per cent of the sale price and then pay that to the ATO.

The new rules were introduced so foreign residents could meet their capital gains tax liabilities. Amounts withheld could then be credited against their final income tax and assessed on foreign residents' income tax returns, according to the ATO.

Allen encouraged all Australian residents who were looking to sell property with a value of $2 million or more "to apply for the clearance certificate as early as possible".

The new law will be enforced from 1 July 2016, and the certificates are valid for 12 months from issue and must be valid at the time it is made available to the buyer, the ATO said.

The ATO warned penalties would apply if the seller made false or misleading declarations to the ATO, or "if the buyer failed to withhold when they should".