Property 101: The $2 million luxury homes proof of citizenship paperwork

New legislation governing the sale of $2 million plus homes will have significant implications for all legal professionals, according to Peter Maloney, the chief at legal technology and services company GlobalX Legal Solutions.

The new laws, which come into effect on 1 July will require all sellers of properties with a market value of more than $2 million to prove they are Australian.

Without proof of citizenship, known as a Clearance Certificate, the legislation will see purchasers act as tax collectors, sending 10 per cent of the purchase price to the ATO.

It centres around clause 31.

GlobalX Legal Solutions CEO Peter Maloney said the changes would have a significant impact on the roles of legal professionals in the industry who would be required to ensure their clients were taking the right steps in the selling or buying of property.  

“These changes will affect the growing number of high value homes of Australian buyers and sellers, so it is imperative legal professionals and conveyancers are prepared come July 1 when these changes go live,” he said.

“The legislation is expected to generate $330 million in revenue over the next four years, with a $770 million compliance cost over the next decade.”

Mr Maloney said while the imposed tax on foreign investors would help boost the Australian economy and recoup investor funds sent offshore, it was crucial for legal and conveyancing professionals to understand the intricacies of the changes.

“The onus of proof will now fall on Australian vendors to prove their residency status to exempt them from the new 10 percent non-final withholding tax but, provided property lawyers and conveyancers are prepared to ensure the necessary documents are readied in advance, this shouldn’t be a timely and complicated process or cause unnecessary delays in the settlement process,” he said.

“We are currently offering our clients a range of informational webinars and sessions to equip them with the knowledge and technical understanding of these changes to ensure the buying and selling process remains a seamless and smooth process for their clients.”

Real Estate Institute of Australia (REIA) President Neville Sanders said the institute supported the legislation, but stressed the importance of real estate and legal professionals understanding their obligations under the new laws.

“Essentially this is the GST withholding tax process coming into effect in the housing market, which is long overdue in Australia,” he said.

 For more information about the legislation.