The proof is always in the eating! This is no different when you’re dealing with new legislation. The ramifications of such legislation are not truly known until you are in the midst of representing somebody.

The Federal Government have introduced a scheme whereby every vendor must provide a certificate to the purchaser to prove that they are an Australian resident and Australian taxpayer for properties which sell over $750,000. Failure of the vendor to provide that certificate to a purchaser means that the purchaser must take 10 percent of the purchase price and give it to the Australia Taxation Office.

Solicitors have been advised that this is to prevent overseas investors escaping from paying capital gains tax. Unfortunately, you can be an Australian Citizen and still be caught by this legislation.

In the past couple of weeks, Leverage has made certain discoveries. First, we had an Australian citizen who was working overseas as a missionary. The Australian Taxation Office reviews all border records and identified that she had lived overseas for many years. They refused to give her a certificate, which meant that when she sells her property, the purchaser must take 10 percent of the purchase price at settlement.

Secondly, we had a couple who had been Australian permanent residents since 2005. One of the couple had returned to their homeland to care for a sick family member. The ATO were able to identify that this person had spent only 16 weeks in the country in the last 3 years. No certificate was therefore issued, as they were not considered Australian taxpayers.

In these circumstances, a solicitor can apply for a variation so that a certificate can be obtained. What grounds the ATO will set for granting a variation and therefore a certificate, is unknown to all of us. There is no clear criteria or guidelines.

If you are intending to go and live overseas, ensure that you put in a tax return. Even if you are earning no money, that tax return becomes fundamental.

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

To get in touch with Bailey, please email info@leveragegroup.com.au or call 1300 438 538