Like any big brother, the government has a sneaky way of watching what you do. When you think you’re doing something for another reason, the government big brother often has a hidden agenda. This is definitely the case with the ATO certificates.

Governments love paper trails. The only way the government can catch you out is by having a paper trail, which can be cross-referenced with another database. Governments love this because it is not human resources intensive, programs can be developed to do it for them.

On the 1st of July 2016, the government introduced a $2million threshold for foreign resident capital gains withholding. We thought it was to stop the rich Chinese from invading our country and taking the land over. All of us applauded the government because we don’t want those invaders to take our best crops.

In fact, the government tapped into our anguish and satisfied our insatiable appetite to slap those who invest in our country. By tapping into it, they have now set up a system, which can alert them when you sell any property. Until this event, the ATO had to do some work to identify whether you sold an investment property or a home. They needed to go to the property register and do a search on each individual name to identify whether that person held two properties. If the property had sold, they needed to do an historical search. This meant that, a number of people slipped through the cracks and didn’t have to pay any capital gains tax. You might think this trick is for the wealthy, but it was normally for the punters who needed to sell an investment property to buy a new home or to move into a retirement village.

From the 1st of July this year, if you sell a house in excess of $750,000, you will have to obtain a certificate from the ATO stating that you are an Australian taxpayer. Stealthy big brother has said this is to ensure that foreign nationals are paying their tax. The law is that, if the vendor cannot provide a certificate to the purchaser’s solicitor, the purchaser is to deduct 10% of the purchase price and refer it directly to the ATO. This ensures that overseas buyers pay their fair share of capital gains. This seems absolutely a good objective. It is a pity the same philosophy does not apply to multinationals.

What in fact this system does is that it tracks houses when they are sold. Part of the application form is that you need to tell the ATO when a property is exchanged and when it is due to settle. Most of all it traps your information regarding when you are due to sell your house. This information must be attached to tax records to provide the certificate.

The government should be congratulated for its cleverness. They now have a database with records of when you buy and sell properties. They will continue to argue that it is to stop the foreign investor. The people who agree with this position will clearly point to the fact that there is a cap of $750,000. Anyone who lives in Sydney or Melbourne will know that this doesn’t just apply to the rich Chinese. It applies to all parts of the population who live in Sydney.

Just remember, they dropped the threshold from $2 million to $750,000 in two years. What is stopping them from continuing to drop this threshold until they trap every property, which is bought and sold in this country?

No, I should not be upset about the Federal Government ensuring they collect their fair share of capital gains taxes. But in the spirit of Kerry Packer, I have no problems with them collecting the money if they knew how to use it.


This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email or call 1300 438 538