Capital Gains Tax Withholding Regime and its application in Self Managed Super


Mary and John purchased a property in NSW using their SMSF in 2012 under a limited recourse borrowing arrangement. Their SMSF has recently repaid the loan and they are now wanting to transfer the property back to their SMSF.

Mary and John have recently heard about the Australian Taxation Office (‘ATO’) introducing a new regime called the Capital Gains Tax Withholding Regime and want to know whether this regime would apply to transfers of real property in Australia that involves trusts and superannuation funds.

Under this regime the purchaser must withhold 12.5% of the purchase price in transactions involving taxable Australian real property that has a market value of $750,000 or more, unless the vendor shows the purchaser a clearance certificate from the ATO. This regime applies to trusts and superannuation funds.

It is important to note that this regime is only applicable where the current market value of the property is $750,000 or more. However, in Mary and John’s case, a recent valuation of the property determined that the property’s current market value was $765,000.

As the market value of the property is over the $750,000 threshold the regime is applicable to John and Mary’s case. Interestingly enough, under unwinding transactions (i.e. where property is transferred back to the Fund Trustee from the Holding Trustee after the repayment of a limited recourse loan) and transactions which involve changing the legal title of an SMSFs assets following a change in trustee generally involve assets that are transferred with no monetary consideration.

Despite the purchaser (i.e. Fund Trustee) being unlikely to withhold 12.5% of the purchase price from the vendor (i.e. Holding Trustee) as a result of the property being transferred at no monetary consideration the Holding Trustee should nevertheless provide the Fund Trustee with a clearance certificate.

Mary and John in their capacity as the directors of the Holding Trustee would need to provide the Fund Trustee with the clearance certificate at or before settlement. An application for the clearance certificate must be made online through the ATO’s website and should be made by John and Mary at least 28 days before settlement in order to avoid delays.

Where the regime is applicable, but no clearance certificate is provided by the Holding Trustee, the Fund Trustee could be required to remit 12.5% of the purchase price to the ATO. Where a valid clearance certificate is provided, the purchaser would not be required to withhold an amount from the purchase price for the vendor listed in the clearance certificate.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222 or email to see how we can assist.