Sun Property Group (SPG) has taken a major step to reinforce its commitment to consumer trust by securing Latent Defects Insurance (LDI) from Resilience Insurance for its nearly completed Willoughby development on Sydney’s Lower North Shore.

The boutique project, Aurora, comprising 12 apartments and a ground-floor commercial space, is one of few in the region to adopt the forward-thinking insurance model—offering a point of difference in a competitive market.

For Cameron Johnson, General Manager at Sun Property Group, the decision to adopt LDI was rooted in the company’s long-standing philosophy of maintaining a highly personalised relationship with its end users.

“We’ve always taken ownership over our product,” Johnson said. “Introducing LDI is not just about peace of mind for the buyer—it’s about raising the internal bar. It becomes the baseline for how we do things going forward.”

[smartcode_project:default project_id=109919 project_image_fid=205006]

While hundreds of developers and builders have taken out an LDI policy from Resilience Insurance, the insurance is still relatively new to Australia. Johnson says he sees significant future potential with LDI nationwide, with both&nbsp;regulatory and market frameworks starting to evolve to support its wider use in class two buildings.

“When we started the Willoughby project, LDI was still just a concept being floated by the Building Commissioner’s office," Johnson says.

"Delays in the construction timeline gave us the unique opportunity to adopt it as the product became more available in late 2023."

That timing aligned with a shift in construction contractors on the project, which opened the door for a more collaborative and considered implementation of the insurance. According to Johnson, Resilience Insurance was proactive and solution-oriented.

“It wasn’t just about us buying a product off the shelf. It was a dialogue—how can we work together to deliver something that meets both of our needs?” he added.

[smartcode_project:default project_id=109919 project_image_fid=5717]

LDI covers major structural defects for up to 10 years post-completion and offers an alternative to the traditional developer bond held under the Department of Fair Trading’s scheme. SPG prudently factor in a two per cent cost profile for such measures into its feasibility, treating it as “business as usual.”

“What LDI does is show the consumer that we’re front-ending our responsibilities—design, delivery, documentation, execution. That whole chain of custody is assessed and independently reviewed throughout construction. It’s a rubber stamp on quality,” Johnson said.

In a region where no other nearby developments currently carry LDI, the move also creates a market differentiator. While some projects may carry an iCIRT rating, few offer the depth of protection and oversight that LDI provides, especially outside of publicly listed organisations.

Aurora is being brought to market by Henry Burke of McGrath Projects. With the recent cut in interest rates Burke expects that many first home buyers and investors will jump at the chance to buy in Aurora due to its convenient location, fantastic retail amenity, picturesque parks with leafy walks, and excellent transport connections with only one stop to Sydney CBD. He expects a local owner-occupier to secure the standout penthouse which offers 175 sqm of internal space and further 200 sqm of outdoor space.

[smartcode_project:default project_id=109919 project_image_fid=205010]

Johnson says Aurora residents will not only benefit from the first right insurance policy, which means action is taken immediately rather than often long and complicated battles as developers and builders point fingers at each other as to who created the issue, but from how it can benefit the strata communities of the building.

Many buyers, especially first-time apartment owners, have limited understanding of shared infrastructure or the responsibilities of Owners Corporations. LDI adds an important layer of education, structure, and protection.

“People want to move in and enjoy what they’ve bought. But when things go wrong, that’s when emotions and stress levels rise. The insurance policy gives owners a clearer path to resolution—an assured, regulated compensation process. It also helps equip owners and managers with the knowledge they need to maintain the building properly.”

The insurance includes tools such as service penetration matrices and access documentation—going far beyond standard build drawings. Johnson says it’s about delivering not just a home, but a sustainable, manageable asset.

[smartcode_project:default project_id=109919 project_image_fid=343670]

Sun Property Group continues to build on its strong track record across Sydney’s Lower North Shore, with an upcoming major development of its Bowen Street, Chatswood landholdings and additional projects underway in Melbourne. The team recently completed its debut Melbourne apartment project, The Brookville in Toorak, showcasing their commitment to delivering high-quality, design-led communities.

In a region where no other nearby developments currently carry LDI, the move also creates a market differentiator

Joel Robinson

Sun Property Group approaches completion of Willoughby's first apartment development with 10-year Latent Defects Insurance

Renowned developer-builder DASCO has unveiled its much-anticipated new development in the heart of Epping.

The architectural brief for Turner Studio was to “create a community where residents are completely immersed in a paradise for the senses.”

The result is <a href="https://www.apartments.com.au/new-apartments/senso-epping-242-244-beecroft-road-epping-nsw-2121">Senso</a>, a series of buildings that have been oriented around an unrepeatable 10,000 sqm-plus site to create a facility-laden, landscape-first precinct, something of which Epping and its surrounds have not seen before.

There are 479 apartments available in a variety of floorplans across the five buildings, a mix of one-, two-, and three-bedroom apartments in addition to a curated penthouse collection.

[smartcode_project:default project_id=134954 project_image_fid=4553]

The apartments have been designed to appeal to the owner-occupier market, with generous floorplans, premium materials, and optional upgrades including integrated refrigeration, bespoke joinery, and motorised blinds.

<a href="https://www.apartments.com.au/developers/dasco-australia">DASCO</a>, who builds its own developments, is once again bringing peace of mind to its clients by taking the 10-year Latent Defects Insurance policy offered by Resilience Insurance, which protects buyers against any structural or waterproofing issues for 10 years post completion of the building. This insurance can only be taken out by the builder or developer and not by individual apartment owners.

[smartcode_project:default project_id=134954 project_image_fid=4552]

DASCO is known for creating more than just apartments — they create places where people connect. Senso will have over 4,000 sqm of resort-inspired communal amenity in the form of two rooftop pools, a celestial outdoor cinema, wellness club, sensory walk, and an observation deck, in addition to multiple BBQ and outdoor communal areas on multiple levels, intended to deliver a complete lifestyle offering within the residential environment.

There will be over 800 sqm of retail space on street level, which will likely be run as hospitality venues.

[smartcode_project:default project_id=134954 project_image_fid=4396]

Located adjacent to the new Epping Town Centre masterplan, and just a five-minute walk from Epping Metro Station, Senso offers seamless access to Macquarie Park, Chatswood and the Sydney CBD. Families who are interested in the large two- and three-bedroom apartments are within proximity to several regarded educational institutions including Macquarie University, James Ruse Agricultural High, and Cheltenham Girls School.

The project also leverages Epping’s growing dining and retail precinct, proximity to Macquarie Centre, and access to natural assets including Terrys Creek walking trails and Boronia Park.

[smartcode_project:default project_id=134954 project_image_fid=4399]

With a 33-year track record and over 7,000 dwellings delivered, DASCO continues to develop and build; a business model that enables integrated delivery and peace of mind, especially when Senso is backed by Latent Defects Insurance (LDI), providing 10 years of protection for buyers at no additional cost.

The launch of Senso Epping reinforces DASCO’s active pipeline of Sydney-based developments at a time when the market is increasingly focused on owner-occupier appeal, delivery confidence, and long-term quality.

DASCO is partnering on Senso Epping with leading Australian alternative asset management firm Metrics, which has more than $30 billion in assets under management.

[smartcode_project_cta:default project_id=134954]

DASCO reveals Senso, Epping’s first resort-style apartment development

Preliminary data by research giant Charter Keck Cramer reveals a 54 per cent decline in Build to Sell apartments across Australia's capital cities, while the Build to Rent boom continues with a 378 per cent increase over the last five years.

Charter Keck Cramer's upcoming National State of the Market Report - Key Metropolitan Areas, scheduled for release in September, will reveal&nbsp;a dramatic transformation in apartment supply patterns across Australia's capital cities between FY2016-2020 and FY2021-2025.

The Build to Sell (BTS) apartment sector has experienced a substantial contraction, with total supply falling by 54 per cent compared to the previous five-year period. The decline represents a reduction of 149,200 apartments across all capital cities.

<img alt="BTS Charter Keck Cramer" data-entity-type="file" data-entity-uuid="3db2ddf3-e7c0-481f-b8b9-63efb365cb80" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-08-20%20at%2011.26.34%E2%80%AFAM.png?VersionId=bsQl8inhZA7FeiPamnGvw1tse0obBdSd" />

Sydney led the downturn with a decrease of 73,600 apartments, followed by Melbourne (-42,800) and Brisbane (-26,800). Perth and Adelaide also recorded significant declines of 6,400 and 2,400 apartments respectively. Only Gold Coast and Canberra bucked the trend, with modest increases of 500 and 2,300 apartments.

In stark contrast, the Build to Rent (BTR) sector has emerged as a major force in the apartment market, recording a remarkable 378% increase in supply. This growth added 8,590 apartments across the capital cities during FY2021-2025. Melbourne dominated BTR growth with 6,160 additional apartments, while Sydney contributed 2,100 units. Brisbane and Canberra also recorded growth of 800 and 330 apartments respectively. Gold Coast and Perth recorded minor declines, while Adelaide maintained steady levels.

<img alt="BTR CKC" data-entity-type="file" data-entity-uuid="ca13ffd4-ab93-4828-afd2-4c3dccbd2b51" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-08-20%20at%2011.28.54%E2%80%AFAM.png?VersionId=SXNnpcJuFD36ViWOwF6izBBqcQc3NWao" />

“These preliminary findings indicate a fundamental shift in Australia's apartment development landscape, with traditional Build to Sell models giving way to institutional Build to Rent developments,” said Richard Temlett, Charter Keck Cramer’s National Executive Director of Research.

"This transition reflects changing investor preferences, regulatory environments and housing affordability challenges across major metropolitan areas.”

The complete Charter Keck Cramer National State of the Market Report – Key Metropolitan Areas will provide comprehensive analysis of these trends, their underlying drivers and implications for developers, investors and policymakers when released in September.

Build to Sell apartment supply drops 54% in five years across Australian capital cities

Verso Development Group is seeking to bring over 1,100 apartments to the heart of Brisbane's Toowong, with plans filed for a $1 billion, triple tower development known as Toowong Central.

The landmark urban regeneration project "aims to reshape the core of Brisbane’s inner-west riverside suburb."

Covering over 1.4-hectares across&nbsp;Sherwood Road, High Street, and Jephson Street, Toowong Central has been designed by KHA and will comprise three towers rising 49, 55, and 58 levels.

<img alt="Toowong Central" data-entity-type="file" data-entity-uuid="48611e3d-7123-4b99-b2cb-bfa4bc98024f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/amenities.png?VersionId=yKBexB.BgCkq4OET8fHDkWs0d3DjxOKJ" />

According to the Urban Context Report prepared by Urbis, Toowong Central is positioned as a “city-defining precinct reclaiming Toowong as ‘the best destination in the west’,” with a vision to deliver density differently, strengthen Toowong’s identity, and lead subtropical urban design.

There will be a wide range of apartment configurations, from one-bedrooms to five-bedroom penthouses, as well as short-term accomodation offerings. The design prioritises pedestrian permeability, with an activated public realm featuring a central civic plaza, laneways, and street-level retail and dining.

“The central square’s structure, programming, scale and location creates a social anchor - shaped by its edges, flexible for use, and animated by a diversity of experiences throughout the day and into the evening,” the Urban Context Report noted, reinforcing the project's ambition to become a vibrant community destination.

Design excellence was pursued through an international design competition, attracting entries from renowned practices such as UNStudio and BIG. KHA’s winning design distinguished itself with a ceremonial approach to the public realm, integrating terraces, tiered seating, and green infrastructure to promote social interaction and resilience.

The development builds upon two existing approvals: the 25- and 20-storey towers of the Aviary Toowong proposal, and a separate 25- and 24-storey approval at 88 Jephson Street. Consolidation of these fragmented landholdings under a precinct-wide approach allows for increased community value and cohesive urban integration.

Urbis Director Nicholas Stevenson said Toowong Central will bridge the gap in Toowong's current experience, unlocking the potential of the wider precinct.

"Overcoming experiential constraints and leveraging contextual advantages – Toowong Central will redefine Brisbane's inner west.”

<img alt="Toowong Central" data-entity-type="file" data-entity-uuid="73f7a702-625d-452d-9df2-30a0863ac1e8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/master.png?VersionId=TZdh6wxGC_8IIroXpdkZfuhlS8mFZnea" />

Toowong Central’s ambition extends beyond residential and commercial outcomes. Uses under consideration include a world-class hotel, university facilities, a museum, and health and wellness services, reflecting its role as a western gateway to Brisbane’s growing innovation corridor between the CBD and the University of Queensland.

Urbis Managing Partner James Tuma said Brisbane has no greater opportunity to showcase the future of urban living than Toowong – a sustainable, economically vibrant, and people-centric place that embodies the best of Brisbane.

[The plans] gives us a glimpse into our future as a globally relevant, youthful, entrepreneurial, and distinctly subtropical city.”

$1 billion Toowong Central to deliver 1,100 apartments to undersupplied Brisbane market

In <a href="https://www.apartments.com.au/developments/runaway-bay-qld-4216">Runaway Bay</a>, new townhouse-scale waterfront residences are rare - but ones built to the standards found on Sovereign Island are almost unheard of.

<a href="https://www.apartments.com.au/new-townhouses/ocean-suites-on-jennifer-10-12-jennifer-avenue-runaway-bay-qld-4216">Ocean Suites on Jennifer</a>&nbsp;changes that, delivering a calibre of construction and detailing that places its seven villas well above the typical market offering in this northern Gold Coast pocket.

Ocean Suites on Jennifer will be move-in ready before Christmas this year, giving buyers the chance to spend the summer on the water in one of Runaway Bay’s rare new waterfront residences.&nbsp;

[smartcode_project:default project_id=138718 project_image_fid=214444]

The development is a collaboration between <a href="https://www.apartments.com.au/architects/stuart-osman">Stuart Osman Design</a> and <a href="https://www.apartments.com.au/developers/sand-side-developments">Sand Side Developments</a>, with construction by <a href="https://www.apartments.com.au/builders/alroe-constructions">Alroe Constructions</a>.

Architect Stuart Osman says the intent from the outset was to create a home people would be drawn to. “When you build anything, the design is to make you want to go hang out in this house,” he says.&nbsp;

Ocean Suites on Jennifer’s design features a front façade softened with planter boxes, rear pool areas, and rooftop decks looking over the water.&nbsp;

Inside, voids and high skylights bring daylight deep into the centre of each home, while ceiling heights of 2.85 metres maintain a strong sense of volume.

Each four-level residence spans 345 to 388 sqm, with layouts accommodating multi-generational living - a ground-floor bedroom suite for older family members and upper levels for the rest of the household. A lift connects all floors.

[smartcode_project:default project_id=138718 project_image_fid=214435]

For Andrew Erwin, Director at NPA, the project’s appeal lies in both its location and the detail in execution.&nbsp;

"At Ocean Suites, you’ve got a canal-front setting with direct Broadwater access and a level of finish you’d normally only see in the city’s most prestigious addresses. The four-level layouts, the glass-framed living areas, the private pools, even the extended kitchens, every part of it has been designed with the buyer in mind,” he says.

Those buyers have so far been a mix of Gold Coast locals and interstate purchasers, many seeking a lock-up-and-leave holiday home or a downsized residence without sacrificing space for visiting family.&nbsp;

Older households with teenage children are a recurring profile, drawn to layouts that support multi-generational living and the ability to host extended stays.

[smartcode_project:default project_id=138718 project_image_fid=214432]

Material selection reinforces the project’s quality-first ethos, with every home appointed to a premium standard. Kitchens and ensuites feature engineered stone surfaces, complemented by prestige oak engineered timber floors, Victorian ash hardwood staircases, and soft loop-pile carpet.

Premium lighting, statement pendants, ceiling fans, and Fujitsu ducted air conditioning elevate both comfort and design. Each residence also includes a suite of high-end appliances as standard - Fisher &amp; Paykel integrated fridges, Bosch ovens, induction cooktops and dishwashers, Vintec wine fridges, and Franke sinks.

Beyond the interiors, residents enjoy an enviable lifestyle with rooftop terraces, private plunge pools, fire pit areas, outdoor showers, smart home automation, laundry chutes, and private pontoons.

[smartcode_project:default project_id=138718 project_image_fid=214452]

With no additional upgrade costs, Sand Side Developments underscores its no-shortcuts approach, delivering homes where luxury and amenity come as standard.

Osman adds that the kitchen has been designed as “the main hub of the house” with six metres high skylights above a galley-style layout that “makes it feel bigger, brighter, whiter” and “brings light into the centre of the home.”

Both architect and builder emphasise a shared commitment to delivering the intended design without compromise. “Working with Alroe’s structural team and their construction team, it’s been great to make sure that the look and feel that was originally intended is the result achieved at the end of the project,” Osman says.&nbsp;

[smartcode_project:default project_id=138718 project_image_fid=214453]

Outdoor living has been given equal consideration, with rooftop terraces designed for entertaining with a fire pit and bar, and spacious undercover patios featuring private plunge pools.

The marine access is as carefully executed as the homes themselves. An eight-metre gangway leads to a six-metre private pontoon capable of mooring vessels up to 30 feet, just 300 metres by water from the Broadwater.&nbsp;

Even the orientation of each villa has been optimised to capture long views down the canal, across the Broadwater, and south to Main Beach.

With construction in its final stages, just three of the seven villas remain, priced from $3.365 million to $3.695 million.

[smartcode_project_cta:default project_id=138718]

Sovereign Island standards come to Runaway Bay with Ocean Suites on Jennifer

Capital Gains Tax

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Hi Margaret,
I was reading about Capital Gains Tax (CGT) on principal residences and I was wondering if CGT is applicable on an elderly parent’s home after they have moved to a nursing home. If the home is rented out to pay for the ongoing expenses of nursing care, is CGT applicable after she has passed and the home is sold? Alternatively, if a family member lives in the home until such time as she passes, is capital gains also applicable?
Presently there is family division (as usual) about the way her assets and home should be managed.
Regards,
Katherine
Margaret Lomas' answer is on the next page. Please click below.
<hr class="system-pagebreak">
Capital gains tax is a complicated issue, and I wanted to be sure I got this right for you, so I called my Property Success resident tax expert, Ian Rodrigues, and checked that my understanding around this was correct.
If you own a Principal Place of Residence (PPOR) from which you are absent and you rent it out, you have a six year period where you can have an exemption from CGT, as long as you don’t claim another PPOR exemption. 
If you don’t rent it out, the amount of time that you can claim that exemption is unlimited. This would mean that, as long as the period did not exceed 6 years, renting it out in order to help pay those expenses would be OK. 
Once she passes, the status of the person’s CGT position shifts to those who inherit – if it is still considered her PPOR (so in that six year period) then the CGT status transfers, and the beneficiaries have two years to sell before they incur CGT.
If a family member lived there, and it was to simply take care of the place for your mother, and not a market based arrangement on the same terms as a third party tenant, then this would likely be considered to be the same as if no one lived there.
Of course, if your mother bought the property prior to 19 September, 1985, then all of the above is moot – it’s a pre CGT asset anyway and no CGT applies in any circumstance.
Always check with a good accountant or even the tax office itself though, to ensure that your own situation is covered by these rules.  It’s quite easy to get a private ruling in the event that no one seems sure and that way, you have it all in writing!
Have a property question?  <a href="mailto:askmargaret@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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mlomas-KC9MUPZ6Ca

Ask Margaret: Is CGT applicable if an elderly resident moves to a nursing home?

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New statistics reveal 48% of off-the-plan buyers feel more confident to purchase property following Liberal’s election win on Saturday. Since the election result announcement, the property industry has been forecasting the future of the new development sales in Australia, with many forming the opinion that the market is likely to surge. [1]

On Monday 20th May, <a href="/new-apartments">off-the-plan</a> property marketplace <a href="/">Apartments.com.au</a> asked home-buyers how they felt about buying a <a href="/new-apartments">new apartment</a> or <a href="/new-townhouses">town-home</a> under the current policies. Within a week over 500 responses were recorded, with results showing 48% felt more confident, 31% felt no difference and 22% felt less confident.

<blockquote>
"We saw an almost immediate uplift in enquiries across our off-the-plan project database in the days after the election and this week there has been a renewed confidence from our developer partners. By the time Spring comes back around, I am confident we will see prices surge across the market."
</blockquote>

Mike Bird, Apartments.com.au Executive Director

At the beginning of 2019, Colliers Residential Managing Director <a href="https://www.colliers.com.au/people/peter-chittenden/">Peter Chittenden</a> identified ‘lack of confidence’ among buyers as being one of the biggest threats to the housing market. In a recent comment:

<blockquote>
“There was a list of factors eroding confidence, one was the Federal Election and now post-election I suggest that market activity will start to accelerate again, and yesterday’s rebound in the share market reinforces this view. However, how fast the breaks come off the housing market will again, very-much depend upon confidence.”
</blockquote>

Peter Chittenden, Colliers Managing Director Residential

With this sentiment in mind, we explored some of the ways national policy could reinstate confidence in off-the-plan home buyers.

<h2 class="rtecenter">WILL THIS HAVE A POSITIVE IMPACT ON THE PROPERTY MARKET?</h2>

<h2>APRA loosens lending constraints </h2>

The <a href="https://www.apra.gov.au/">Australian Prudential Regulation Authority</a> (APRA) has just announced they will be lowering the minimum interest rate serviceability buffer, providing home-buyers with the opportunity to enter the <a href="/new-apartments">off-the-plan</a> property market again with a smaller deposit.

CoreLogic's senior analyst <a href="https://www.afr.com/real-estate/residential/apra-game-changer-to-boost-prices-20190521-p51pih">Cameron Kusher explained</a> that APRA's policy change could mitigate the future house pricing fall, and hasten the market turn-around, with a positive outlook expected from mid-2020 – to as early as the end of 2019.

Chittenden also identifies that the desire for home ownership in Australia is still prevalent, so with more financial support, the goal of first home buyers acquiring their first home could become more attainable.

<blockquote>
“The results also proved to my thinking that the ‘Australian Dream’ of homeownership is still very much alive in 2019, and that Australians have not given up on the idea, just the opposite.”
</blockquote>

<a href="https://www.cbre.com.au/">CBRE</a>’s Managing Director of Residential Projects Victoria, Andrew Leoncelli also attributes loan constraints to the decline of the off-the-plan market.

<blockquote>
“The fundamentals of the Victorian and wider Australian Economy are good but confidence and momentum had been lost due to the banking royal commission and all of the exogenous bank and APRA attempts to cool the market.”
</blockquote>

<h2>Negative gearing to remain</h2>

Labor’s mission to halve capital gains tax could have had a significant impact on the investor market, making ownership of investment properties less desirable. Concerns suggested that the removal of negative gearing could result in rental increases to accommodate the loss of ROI, however with negative gearing still intact, it is anticipated that a greater sense of confidence could be instilled in investors as the property market regains a stronger sense of stability.

<a href="/tag/marshall-white-projects">Marshall White Projects</a> Director Leonard Teplin identifies the rise in empty nesters entering the property market,

<blockquote>
“One of the mindsets most of us crave is certainty, and since the real estate market opened for business in 2019, the most basic of desires for most Victorians to own property had once more prevailed and buyers (particularly the popular empty nester) are continuing to re-enter the property market in numbers.”
</blockquote>

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/image_5.png" rel="gallery-all"><img alt="" class="image-article-full-width-580px" height="343" src="/s3/files/styles/article_full_width_580px/public/pictures/article-images/image_5.png?itok=OW4zu9WY" width="580"></a></figure> 

However from 2018 Q2 – 2019 Q2, Apartments.com.au recorded that the significant rise of next home buyers has been notably overtaken by first home buyers, as well as a strong decline in investor market interest.

As the off-the-plan market begins to stabilise following the election result, it will be interesting to see whether investors re-enter the market with greater confidence.

<blockquote>
“A confident Morrison majority and time after the royal commission with banks back lending and APRA relaxing the credit controls and interest rate cuts about to come we can see this as the return of confidence for the local investor to start buying again.”
</blockquote>

Andrew Leoncelli, CBRE Managing Director, Residential Projects Victoria

<h2>Will the election result build a fair playing-field for First Home Buyers and investors alike?</h2>

With the introduction of the new 5% deposit rate for first home buyers, as opposed to the original 20%, buying a first home in Australia could become more attainable to more Australians looking to acquire property.

The introduction of this policy could potentially see a surge in demand, which could in-turn boost property prices, causing a reverse effect. Another consideration is that mortgages will take longer to service, which is great for the bank, but not for the property owner.

For investors, the fact that no changes will be made to negative gearing or the capital gains tax is good for business.

Marshall White’s Leonard Teplin explains that due to the fact that the current government had already introduced restrictive changes to planning laws, tightening of construction funds, tax on foreign buyers etc. – more fears of potential change posed by Labor could essentially, “fuel the fire of uncertainty for an aspirational purchaser.”

<a href="https://www.360propertygroup.com.au/projects">Three Sixty° Property Group's</a> Founder and Managing Director John Meagher held a similar view, commenting that the overall outcome would essentially result in a healthier property market.

<blockquote type="cite">
<div name="messageReplySection">
<div>
A positive Election result for the property industry with no changes to capital gains tax, no changes to negative gearing, a new stimulus for first home buyers through a deposit assist scheme all means no disruption to our industry.  A likely interest rate drop later in the year coupled with record low vacancy rates all points to a heather property market.
</div>
</div>
</blockquote>

Whether the future of homeownership in Australia proves to be advantageous is currently unknown, but what we do know for sure is that the majority of our off-the-plan buyers have regained confidence in the market.

As for property developers ­– as CBRE’s Andrew Leoncelli succinctly states, “Get your projects ready for a strong September and October spring season!”

Thanks to Peter Chittenden, Andrew Leoncelli, Leonard Teplin and John Meagher for sharing your opinions. 

[1] Sources: <a href="https://www.afr.com/news/economy/labor-loss-to-deliver-a-positive-property-shock-20190519-p51ow6">AFR</a>, <a href="https://www.news.com.au/finance/business/banking/melbourne-and-sydney-property-markets-closer-to-the-bottom-after-shock-coalition-victory/news-story/143cdced7fc55ee7b04cf74b93cef9f4">news.com.au</a>, <a href="https://www.smartpropertyinvestment.com.au/tax-and-legal/19598-property-industry-reacts-to-liberal-party-win">Smart Property Investment</a>

 

<div class="rtecenter">FEATURED PROJECTS</div>

<div class="rtecenter"><a href="/new-apartments/mont-albert-place-801-whitehorse-road-mont-albert">Mont Albert Place</a> | <a href="/buildings/no-1-collins-wharf-915-collins-street-docklands">No.1 Collins</a> | <a href="/buildings/melbourne-grand-560-lonsdale-street-melbourne">Melbourne Grand</a> | <a href="/buildings/haven-townhomes-42-homeleigh-road-keysborough">Haven Townhomes</a> | <a href="/buildings/ensemble-114-116-tennyson-street-elwood">Ensemble</a></div>
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urban.com.au

Off-the-plan property buyer confidence surges post-election

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Investors will have just over six months to secure established property acquisitions to negatively gear if Labor wins the anticipated May election, it will be confirmed today.
Shadow treasurer Chris Bowen will use a speech to the Financial Services Council to announce January 1, 2020 as the start date for the policy, The Australian Financial Review indicated. 
The date also applies to the grandfathered capital gains tax policy.
The policy will need to pass through the Senate to take effect should Labor win government.
The timing announcement is likely to take any urgent imperative out of investors seeking to secure a negatively geared acquisition before the upcoming Federal election.
The six months following could see a spike in investor interest in securing established properties to negatively gear.
However this week The Urban Development Institute of Australia warned that the policy after implementation would see investors likely rely only on owner-occupiers to buy any listed investment properties which could be a "tough landscape" for investors.
The Real Estate Institute of Australia (REIA) has reiterated its strong opposition to the Labor Party’s negative gearing and capital gains tax policy following the announcment that the 1 January 2020 would be the start date for their negative gearing and capital gains tax increases if they were to win the Federal election. 
“The REIA has always been concerned with the impact the policy would have on housing markets, buyers, renters and economic activity,” REIA President Adrian Kelly said.  “This concern is magnified in the current market. 
“There is almost truck loads of analysis and reports showing the adverse impacts of the policy on mum and dad investors, home owners, renters, the construction industry, state governments and the economy.
“The latest was last week when SQM Research showed that:  house prices would drop between 5% to 12% on a weighted average for the capital cities for 2020 to 2022 over and above any other falls being experienced; rents are expected to increase by between 8% and 15% on a weighted average for the capital cities for 2020 to 2022; housing construction activity will fall by 25% to 30% from 2019 levels, which; will have employment and GDP impacts; property sales turnover is forecast to fall by a further 12% to 15%, resulting in; a drop in state stamp duty revenue of approximately $2.3 billion.
“For first home buyers, who according to Labor, should see improved housing affordability by a “levelling of the playing field” will now face a faltering economy, lower employment prospects, the possibility of higher interest rates under a Labor Government* and higher rents whilst they save for a deposit,” Mr Kelly said.  
 
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j.ballantyne1990-6AQqhLzZaK

Labor sets January 1, 2020 start date for its CGT and negative gearing policy implementation 

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GUEST OBSERVATION
New Zealand’s Tax Working Group (<a href="https://taxworkinggroup.govt.nz/" target="_blank">TWG</a>) released its <a href="https://taxworkinggroup.govt.nz/resources/future-tax-final-report" target="_blank">final report</a> last month, with the most significant recommendation to introduce a capital gains tax.
The key motivation for the Labour-led government in establishing the TWG was to investigate a fairer tax system. For reasons of simplicity, the TWG proposes broad exclusions from a capital gains tax, including a taxpayer’s primary home and all personal assets such as collectables and artworks.
I argue that this exclusion could nudge taxpayers towards investing in art.
Taxing works of art
My research explores how the tax system can promote the arts and fair reward for artists. But I am concerned by the lack of principle or clear purpose underpinning the TWG’s collectables recommendation.
Few countries specifically privilege artworks for capital gains tax purposes. But in the United States, artworks have long qualified for roll-over relief, whereby a taxpayer can sell an artwork but not pay tax on any gain <a href="https://www.propertyobserver.com.au/https://www.congress.gov/bill/115th-congress/house-bill/1" target="_blank">if they reinvest in art</a>. This roll-over relief has been eliminated by Donald Trump’s tax reforms, but <a href="https://www.theartnewspaper.com/news/trump-s-tax-act-offers-potential-tax-havens-for-art" target="_blank">investments in special economic development areas</a> offer similar deferral opportunities or even elimination of capital gains tax liability.
A more common approach internationally is to include <a href="https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/financial-services/artandfinance/lu-en-artfinance-taxmatrix-16092013.pdf" target="_blank">artworks in a general category of personal assets</a> that are excluded, provided they are held for at least a year. France excludes sales of artworks or other collectables from a capital gains tax if the sale price does not exceed €5000 (about A$8,000). Similarly, the United Kingdom only taxes collectables sold for more than £6,000 (about A$11,000) <a href="https://www.gov.uk/capital-gains-tax-personal-possessions" target="_blank">but excludes other personal assets</a>. In contrast, <a href="https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/#Personal_use_assets" target="_blank">Australia taxes the gains on collectables</a> bought for more than A$500 but excludes gains on personal-use assets bought for no more than A$10,000.
The problem of categories
Once policymakers draw distinctions between types of assets for capital gains purposes, anomalies inevitably arise. The United Kingdom distinguishes between personal assets deemed to have a <a href="https://www.gov.uk/capital-gains-tax-personal-possessions" target="_blank">lifespan shorter or longer than 50 years</a>. Stamps, for example, are deemed to have a lifespan of more than 50 years and therefore potentially attract capital gains tax, whereas antique clocks or watches are deemed to last fewer than 50 years and are not taxed.
<img src="https://images.theconversation.com/files/262266/original/file-20190305-48435-1ufz3sg.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=237&amp;fit=clip" alt="">
Portrait of Omai, by Joshua Reynolds, depicts Omai, a Pacific Islander who travelled to England with the second expedition of Captain James Cook. <a class="source" href="https://commons.wikimedia.org/wiki/File:Joshua_Reynolds_-_Portrait_of_Omai.jpg" target="_blank">From Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/" target="_blank">CC BY-SA</a>
But since plant or machinery used in a business is deemed to have a lifespan of fewer than 50 years, the <a href="https://www.pumptax.com/wp-content/uploads/old/documents/HMRC%20v%20%20Lord%20Howards%20Executors%20approvedl.pdf" target="_blank">Court of Appeal famously ruled</a> that Omai, a 250-year-old painting by Sir Joshua Reynolds, was plant that did not attract capital gains tax on disposal.
In Australia, personal-use assets include boats, furniture, electrical goods and household items. Collectables include paintings, sculptures, drawings, engravings and photographs. Disputably, personal-use assets are presumed to be wasting assets, whereas collectables are not.
Different types of assets may not fit neatly into either category: for example, furniture has a utilitarian function and eventually deteriorates but is commonly collected. It is a troubling thought that such policy distinctions may lead to a (presumably unintended) preference for the utilitarian over the aesthetic.
For the sake of simplicity, New Zealand’s TWG recommends excluding all personal assets, including collectables, from its proposed capital gains tax. Artists may incidentally benefit from such an exclusion. A wealthy person might choose to invest in artworks to hang on the walls of their tax-free principal residence. In Australia, the tax nudge is in favour of non-collectable personal-use assets.
An investor might even choose to invest in artworks rather than, say, listed shares. These investment decisions could have a beneficial trickle-down effect for living domestic artists, although purchasing works by internationally recognised artists with established track records may be a more attractive investment option.
Proposed exclusion for artworks
Capital gains tax is an inherently complex tax. The complexities are exacerbated once politically necessary exemptions are introduced. Every deviation from the fundamental principle that all receipts should be taxed diminishes equity. But equity is not the only generally accepted tax principle. Efficiency, neutrality, sustainability and simplicity, among other criteria, should also be considered.
With regard to personal assets, the TWG has elevated simplicity above other pertinent considerations. Consequently, wealthy people might continue to receive tax-free capital gains by investing in their principal residence and collectables. This possibility would be unfair, inefficient, non-neutral and unsustainable.
Promoting the arts in the public sphere and the economic well-being of artists is most effectively pursued through direct grants and subsidies, but a proportionate capital gains tax exclusion might also assist. For example, while roll-over relief in the United States generally benefited the art market, it may have been a disproportionate way of promoting public access to the arts or helping artists most in need.
A painting by an old master stored in a bank vault has no immediate social benefit.
So how might a tax exclusion benefit the arts and artists?
First, no distinction should be drawn, as Australia does, between personal-use and collectable assets, because a nudge towards personal-use assets may discourage investment in artworks.
Second, a cap on the value of excluded collectables, say NZ$10,000, might encourage purchases of less expensive artworks created by emerging local artists.
Third, for more valuable artworks a rebate might apply for public display. For example, if an owner lends an artwork to a public gallery for half the period they own it, a 50% rebate could apply. If the New Zealand government takes up the TWG recommendation for a capital gains tax, proposed exclusions could be modified to benefit the arts and artists. Australia might also usefully reconsider how it treats artworks for tax purposes.<img src="https://counter.theconversation.com/content/112765/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Jonathan Barrett, Lecturer, Victoria University of Wellington
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/new-zealands-proposed-capital-gains-tax-could-nudge-taxpayers-to-invest-in-art-instead-of-property-112765" target="_blank">original article</a>.
Main photo;  For more valuable artworks, a tax rebate could apply if an owner lends an artwork to a public gallery. from www.shutterstock.com, <a href="http://creativecommons.org/licenses/by-sa/4.0/" target="_blank">CC BY-SA</a>
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New Zealand’s proposed capital gains tax could nudge taxpayers to invest in art instead of property

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GUEST OBSERVATION
The losers from Labor’s capital gains tax policy aren’t all where you would expect them to be, whatever you expect. 
Labor is going into the election promising to tax capital gains more heavily. Depending on who you listen to, it’ll either hit the very highest of earners, or middle earners – people such as teachers and nurses. The same critics have claimed different things at different times.
The truth is even stranger. In part because people who present as being part of one income group are often better described as being part of another.
It’s certainly stranger than fiction.
What are capital gains?
Capital gains are the profits made from buying something at one price and selling it at another. These profits are typically taxed at only <a href="https://www.ato.gov.au/general/capital-gains-tax/working-out-your-capital-gain-or-loss/working-out-your-capital-gain/the-discount-method-of-calculating-your-capital-gain/" target="_blank">half the rate of other income</a>. (Technically, only half of each capital gain is taxed.)
The discount, introduced by <a href="https://www.theage.com.au/opinion/revenge-bloodymindedness-and-gullibility-the-untaxing-of-capital-gains-20150810-giv8zg" target="_blank">Prime Minister John Howard</a> in late 1999, was sold as ensuring that profit takers wouldn’t be taxed on the workings of inflation, a concession that was already built into the system, although in a more complicated way.
But because inflation had fallen so dramatically, the 50% discount went much further. It taxed capital gains, so-called “unearned income”, at a much lower rate than income earned in the form of wages and salaries, and also at a lower rate than bank interest and other forms of income.
In the lead up to the coming election (and the last one) the Labor Party has promised to wind back the discount, cutting it from 50% to 25% for newly-purchased assets held for more than a year, meaning that for those assets <a href="https://www.alp.org.au/negativegearing" target="_blank">three quarters</a> of each gain will be taxed instead of one half.
There are two (apparently contradictory) views about who the changes will hit, both of them spelled out in the pages of The Australian, and both sourced to the treasurer Josh Frydenberg.
On January 5 the treasurer said investors would pay the “<a href="https://www.theaustralian.com.au/national-affairs/treasury/investors-to-pay-worlds-highest-capital-gains-tax-under-alp/news-story/0e5fdcfd4c942f7346c5385a2848dc67" target="_blank">world’s highest tax</a>” under Labor’s changes.
But that would only be the case if they were the very highest earners, on more than A$180,000. And it would only be the case for a short time where the capital gains are a one off.
Mr Frydenberg quoted a rate of 36.75% for capital gains tax, which would be three quarters of 49%, which itself would be made up of the top marginal rate of 45% plus the 2% Medicare levy plus the 2% temporary budget repair levy that Labor plans to reintroduce for two years.
That top marginal rate only applies to Australians on more than A$180,000.
Then ten days later on January 15, Mr Frydenberg said most of the workers hurt would be on much lower incomes, of up to A$80,000.
Then shadow treasurer Chris Bowen entered the debate, calling Fyrdenberg’s second claim “silly”. He said 70% of the total amount of capital gains tax discounts claimed was claimed by the top earners.
But he didn’t address the treasurer’s contention that most of the beneficiaries are lower earners.
What the data says
The Australian National University’s microsimulation model of the tax and social security system, <a href="http://csrm.cass.anu.edu.au/research/policymod" target="_blank">PolicyMod</a>, and the Australian Tax Officie’s <a href="https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2015-16/" target="_blank">Taxstats 2015-16</a> enable us to get at the truth.
Using a 2% sample of the tax returns submitted, including the information about capital gains and capital losses, we are able to work out who is the hardest hit by capital gains tax by income, age and gender.
At first blush we find that almost all capital gains tax collected - 85% - is paid by the top 10% of income earners. The bottom 10% (and also the bottom 20%) pay nothing.
It shouldn’t be surprising. High earners pay more tax than low earners because they earn more. The top 10% of earners also pay 51% of personal income tax.
Not many people pay capital gains tax
Around 900,000 Australians report capital gains per year, a figure <a href="https://www.theaustralian.com.au/news/inquirer/labors-capital-gains-tax-hike-will-hurt-the-economy/news-story/5f8c61d6b57c107dc70bad55553e8de7" target="_blank">used by the treasurer</a> to suggest capital gains are widespread.
But after taking losses into account, the number reporting net capital gains falls to 670,000. Only about 540,000 of them pay capital gains tax. The others have taxable incomes below the tax-free threshold.
Of the 540,000 who do pay capital gains tax, 29% are in the top 10% of earners by taxable income.
A very high 12.7% are in the top 3% of earners, meaning they are on the very highest tax bracket, earning A$180,000 or more.
Small in number though they are, the Australians in the top 3% who pay capital gains tax, pay 74% of it. They pay 30.7% of all personal income tax.
They’re often retirees, and women
Older Australians pay only 5.6% of all personal income tax but about 29% of all capital gains tax.
Surprisingly, partnered women are also over-represented, paying 19.4% of personal income tax but an outsized 28.7% of capital gains tax. This is what you would expect if couples planning to minimise tax put the asset they were planning to buy and sell in the name of the lower paid partner.
Persons with wages and salaries are underrepresented, paying around 88% of personal income tax but only around 47% of capital gains tax.
But these figures are misleading.
Partnered women pay 19.4% of personal income tax but an outsized 28.7% of capital gains tax. 
It gets stranger still
By definition, most people’s incomes will be high in the year in which they pay capital gains tax. Examining their total income in that year, as we have done, will wrongly make it look as if it is mainly high income people who pay capital gains tax.
An alternative measure would be to rank people by their taxable income after deducting their capital gains. It’d rank them by something more like their normal income.
When we do that we find that the share of capital gains tax paid by the top 10% of earners is nothing like the 85% we first found. It’s a much lower 38%.
This measure produces another, very odd, result.
The bottom 10% turn out to pay, not none of the capital gains tax collected as we had thought, but an overweight 20%.
Stranger still, the next-bottom 10%, the people who fit somewhere between the bottom 10% and the 20%, pay only 4% of the capital gains tax collected.
Our lowest earners embrace capital gains…
There’s something odd at the bottom for those reporting capital gains. The clue lies in what they are at the bottom of. They are at the bottom of the taxable income scale.
And they are indeed odd.
The bottom 10% claim an awful lot of capital gains - an average of A$161,000 per capital gains tax payer, which is more than that claimed by any other income group, including the top 10%.
Capital gains make up a large share of their taxable income, larger than for higher income groups, and far lower than for other low income groups. Only around 8% receive government pensions or allowances.
Although their taxable incomes, after deducting net capital gains, are in the bottom 10%, their actual wealth and living standards are likely much higher up the distribution. Many own shares and businesses or have negatively geared investment properties. They get dividend imputation cheques and report business losses.
…although they don’t act like low earners
To get closer to the unvarnished truth, we would need to compare capital gains by household, examining the combined income of each household, which is less easy to manipulate than the income of an individual. But Australia’s tax system is built around individuals, so it’s hard to do. We would also like to know more about their typical income and whether capital gains were likely a one off or something more permanent.
Here’s what we can say:
Labor’s change will “grandfather” existing assets, meaning they will continue to be taxed under the present, more generous, arrangement. This means Labor’s change won’t have much of an effect for years, making any simple guess of how much money it makes an overestimate.
At the moment, personal taxpayers pay A$6.7 billion per year in capital gains tax. Labor’s changes could potentially reap half that amount, but they would build up to it slowly, and by the time they got there, fewer people would look for capital gains as a means of escaping tax, meaning they would never get there, and giving a boost to other kinds of tax revenue.
It’s pretty certain that those who would feel it most would be higher income earners, older Australians, partnered women, quite often on behalf of their higher income partner.<img src="https://counter.theconversation.com/content/109657/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/ben-phillips-98866" target="_blank">Ben Phillips</a>, Associate Professor, Centre for Social Research and Methods, Director, Centre for Economic Policy Research (CEPR), <a href="http://theconversation.com/institutions/australian-national-university-877" target="_blank">Australian National University</a> and <a href="https://theconversation.com/profiles/matthew-gray-229834" target="_blank">Matthew Gray</a>, Director, ANU Centre for Social Research and Methods, <a href="http://theconversation.com/institutions/australian-national-university-877" target="_blank">Australian National University</a>
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/stranger-than-fiction-who-labors-capital-gains-tax-changes-will-really-hurt-109657" target="_blank">original article</a>.
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Who Labor’s capital gains tax changes will really hurt: Ben Phillips & Matthew Gray

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Hi Margaret,
I converted my main residence to a rental property and bought a house to live and then sold the old/rented property. The property was my principal home, built in 2009 and I occupied it from 2009 to 2015. I then rented and sold it with settlement in 2017 February. 
When calculating capital gains tax (CGT) for my old property, can I add unclaimed interest and rates  to the market valuation I got from when it first started producing income? 
For rental schedule can I include interest up to settlement date, even though the rental contract ended?
Thanks,
Todd
 
Hi Todd, 
When a former family home is subsequently rented out, there are specific rules around the subsequent capital gains tax treatment which will now apply to you.
If you do not wish to claim your principal place of residence on any other property, you can employ the absence rule which allows you to rent that property out for up to six years and, if you either sell it or move back into it within that time, you still don’t accrue a capital gains tax responsibility.
In your case, you may decide to shift that exemption to the new home you bought from the date you moved in, in which case there will be a small CGT liability for you.  Assuming you have a valuation from the date you moved out, you can reset the cost base to being that market valuation, and CGT will apply to any gain made since that time.  As your contract date is December 2016, it will qualify for the over 12 months hold period for the discount, and so the gain will be halved and then CGT applies according to your marginal rate of tax, on that amount.
You ask if you can add any unclaimed interest and rates which occurred while you lived in the property to the market valuation.  The answer to this question is no – as it was a principal place of residence, and these items have no benefits attached.  The market value is the cost base, and it is only any expense incurred after the property becomes income producing which become allowable deductions.
As for the interest, costs associated with owning a rental property can only be claimed as a yearly deduction when the property in question is ‘available’ for rent, and your property ceased being available when the rental contract ended.  However, you may be able to account for this interest in the calculations for assessing the amount of gain – essentially they may become an addition to that cost base.  It’s important that you chat to your accountant about this, as they are qualified to know all of these little nuances of property tax law, and can guide you to ensure that your tax return is prepared legally.
Kind regards,
Margaret
Have a property question? <a href="mailto:askmargaret@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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Ask Margaret: How do I calculate capital gains on the former family home?

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GUEST OBSERVER
The Prime Minister’s statement yesterday that there will be no changes to capital gains tax (CGT) on housing has the full support of the residential building industry. 
New housing is one of the most highly taxed commodities in the Australian economy.
In the lead up to last year’s election there were a range of proposals from reducing CGT on investment properties to applying the tax on the family home. Yesterday’s categorical statement by the government provides continued certainty to the industry and to investors.
The housing industry has opposed changes to the way capital gains are currently treated on investment properties. It would mean investors pay even more tax.
Right now, around two dollars out of every five that an individual pays for a new home is tax. 
Buyers pay those taxes. And then they pay taxes on the taxes. They pay stamp duty on top of taxes, including the GST. And when they eventually sell the property, if they make any money, they pay tax on that. 
Housing cannot be asked to pay even more taxes. It would simply have the opposite effect. 
When it comes to improving housing affordability, the focus should be on increasing supply year on year. This won’t happen by removing the incentives to build new homes and placing pressure on existing housing prices to meet demand.
Graham Wolfe is deputy managing director, HIA, and can be contacted <a href="https://hia.com.au" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

PM’s capital gains tax decision the right one: HIA's Graham Wolfe

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From 1 July 2016 Australian residents selling real estate with a market value of $2 million or more will need to apply for a clearance certificate from the Australian Taxation Office (ATO) to ensure amounts are not withheld from the sale proceeds. 
Where a valid clearance certificate is not provided by settlement, the purchaser is required to withhold 10% of the purchase price and pay this to the ATO. 
Background 
In May 2013 the government announced that it would introduce a 10 percent non-final withholding tax on payments made to foreign residents who dispose of certain taxable Australian property with a market value above a specified threshold. The new legislation for this measure became law in February 2016. 
The types of taxable Australian property this applies to include vacant land, buildings, residential and commercial property, leaseholds and strata title schemes. 
What this means for purchasers
Where a foreign resident disposes of Australian real property with a market value of $2 million or above, the purchaser will be required to withhold 10 percent of the purchase price* and pay it to the Australian Taxation Office (ATO) unless the seller provides you with a variation. Australian residents will need to provide a clearance certificate otherwise a withhold of 10 percent of the purchase price will apply. 
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What this means for sellers 
Australian resident vendors who dispose of Australian real property with a market value of $2 million or above will need to apply for a clearance certificate from the ATO to ensure amounts are not withheld from their sale proceeds. 
All transactions involving real property with a market value of $2 million or above will need the vendor and purchaser to consider if a clearance certificate is required. 
If a purchase price negotiated between a purchaser and vendor is on an ‘arm’s length basis’, then the purchase price may be used as a proxy for market value. 
* Note: The legislation specifies that the 10% withholding is on the ‘first element of the cost base’. However, as purchase price is understood by vendors and purchasers, and in many instances will be equal to the ‘first element of the cost base’, we have used the term purchase price for simplicity. 
When will this apply? 
The new withholding regime will apply to contracts entered into on or after 1 July 2016 for the sale of property with a market value of $2 million or above. 
What if there are multiple purchasers?
The market value of all purchasers’ interests in the transaction must be aggregated in examining whether the $2 million market value threshold has been reached. If the aggregated purchase price is $2 million or above, each purchaser must withhold in proportion to their percentage of the total purchase price. 
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What if there are multiple vendors?
If there are multiple vendors disposing of the property, it is the total market value of the property that determines whether withholding is required by the purchaser. 
That is, if the market value is $2 million or above then the purchaser must withhold 10 percent of this (remembering that the purchase price may be able to be used as a proxy for market value). 
If the purchaser has not been provided with a clearance certificate or a notice of variation from any of the vendors, the purchaser must withhold 10% of the purchase price. 
The amount of withholding will be in proportion to each vendor’s interest in the property, with the total withholding equal to 10% of the property’s market value. 
If any of the vendors provide a clearance certificate or a notice of variation then the amount withheld by the purchaser on that vendor’s proportional interest in the property must reflect this. The purchaser must consider each vendor’s circumstances separately in determining the amount to withhold from each vendor. 
Clearance certificates 
All real property transactions with a market value of $2 million or above will need the vendor and purchaser to consider if a clearance certificate is required. 
Where a clearance certificate is provided, the purchaser is not required to withhold an amount from the purchase price. 
Vendors need to provide a clearance certificate to the purchaser on or before the settlement of the transaction. A clearance certificate must be valid at the time it is provided to the purchaser. 
Clearance certificates are valid for 12 months, and can be used by the same vendor for the sale of multiple properties while valid. 
Who can obtain a clearance certificate? 
Only a vendor who is an Australian resident* can be granted a clearance certificate by the ATO. 
* Note: Residency status for tax purposes is not the same as that for immigration purposes, or for the Foreign Investment Review Board (FIRB). If you are unsure, seek professional advice. 
What if the vendor does not provide a clearance certificate?
If the vendor fails to provide the clearance certificate by settlement, the purchaser is required to withhold 10 percent of the purchase price and pay this to the ATO. 
This means Australian resident vendors of real property with a market value of $2 million or above must apply for a clearance certificate to ensure no funds are withheld from their sale proceeds. 
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When can an Australian resident vendor obtain a clearance certificate?
An Australian resident vendor may apply to the ATO for a clearance certificate at any time when considering the disposal of real property. This can be before the property is listed for sale. 
How can an Australian resident vendor obtain a clearance certificate?
To obtain a clearance certificate, a vendor who is an Australian resident (or their representative) must complete an online ‘Clearance certificate application for Australian residents’ form. This form will be available on ato.gov.au/FRCGW from 27 June 2016. 
A PDF version of the clearance certificate application will be available for contracts that are to be signed and settled within the first two weeks of July 2016. Otherwise, vendors should be encouraged to wait and use the online form from 27 June 2016. 
If the vendor is automatically assessed as an Australian resident, a clearance certificate will be issued electronically within days of the application being submitted. 
If there are data irregularities or exceptions, some manual processing may be required and the clearance certificate will be provided within 14–28 days. 
Higher risk and unusual cases may require greater manual intervention and could take longer to process. 
Variation applications 
Where the vendor is not entitled to a clearance certificate, but believes a withholding of 10 percent is inappropriate, they can apply to the ATO for a variation. Reasons for a variation could include:</div>
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 ■  a foreign resident not making a capital gain on the transaction (for example, because they will make a capital loss or a CGT rollover applies) ■  a foreign resident not otherwise having an income tax liability (for example, because of carried-forward capital losses or tax losses) ■  a scenario where there are multiple vendors, only one of which is a foreign resident.</div>
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 A variation application can be made using the ‘Variation application for foreign residents and other parties’ form. This form will be available on ato.gov.au/FRCGW from 27 June 2016.</div>
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 A PDF version of the variation application will be available for contracts that are to be signed and settled within the first two weeks of July 2016.</div>
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<div class="column">Otherwise, vendors should be encouraged to wait and use the online form from 27 June 2016.</div>
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<div class="column">In the majority of cases (where the ATO has all the required information and the application is successful), the notice of variation will be provided within 28 days.</div>
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<div class="column">The notice of variation should be shown to the purchaser before settlement to ensure the reduced withholding rate applies.  </div>
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Does the withholding need to be provided prior to settlement? 
No. The withholding does not need to be provided until settlement, and it is provided by the purchaser out of the purchase price, not in addition to the purchase price. 
Is the transfer of ownership affected?
No, the withholding does not affect the transfer of ownership between the vendor and the purchaser. 
In some cases the vendor may wish to postpone settlement if they have not yet obtained a clearance certificate or notice of variation, to avoid the purchaser withholding 10 percent of the purchase price and paying it to the ATO. In this scenario, the terms of the contract will apply as normal with respect to delays at settlement. 
What do I need to consider when selling a property?
Where you are engaged by a vendor you need to know what the purchase price will be to determine whether this measure applies. If the purchase price is below $2 million, and it has been negotiated on an arm’s length basis, then no action is required.
If the purchase price is $2 million or above and the vendor is an Australian resident vendor, you should let them know they will need to obtain a clearance certificate from the ATO to avoid 10% of the purchase price being withheld at settlement. 
If you are unsure about the purchase price because the property is going to auction, you should let the Australian resident vendor know they will need a clearance certificate if the purchase price reaches $2 million. 
If the purchase price is $2 million or above and the vendor is a foreign resident, you should let them know that 10 percent of the purchase price will be withheld at settlement by the purchaser and provided to the ATO. You should advise them they may be able to vary the amount that is withheld at settlement in certain circumstances, and direct them to the Variation application for foreign residents and other parties form.
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What if there is a short settlement period?
The same rules apply irrespective of the length of the settlement period. However, if there is a short settlement period you should advise the vendor they will need to obtain a clearance certificate or notice of variation (as appropriate) as soon as possible if they wish to avoid 10 percent of the purchase price being withheld at settlement.
The Australian Institute of Conveyancers was extensively involved in the consultation process for this measure. As such, the ATO is not aware of any inconsistency with the terms of each state’s Conveyancing Act. 
More detailed information about foreign resident capital gains withholding payments is available <a href="https://www.ato.gov.au/general/capital-gains-tax/in-detail/calculating-a-capital-gain-or-loss/foreign-resident-capital-gains-withholding/" target="_blank">here</a>.  
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Property 101: The capital gains withholding payments rules

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GUEST OBSERVER
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Be careful if you are buying or selling property over $2 million in value.
The Australian Government has introduced a new foreign residents’ capital gains withholding tax regime which applies to foreign residents selling real property in Australia with a market value of more than $2 million. It requires the purchaser, where the vendor is a foreign resident, to pay an amount equal to 10% of the purchase price.
The obligation is upon the purchaser to ascertain if the vendor is a foreign resident and if so, pay the withholding tax upon completion of the sale of the asset.  If the purchaser:
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<li>Knows or has reasonable grounds to believe the vendor is a foreign resident; or</li>
<li>The purchaser does not reasonably believe that the vendor is an Australian resident; and</li>
<li>Has a record about the purchase indicating that the vendor has an address outside Australia; or</li>
<li>Is authorised to provide a financial benefit (e.g. make a payment to a place outside of Australia) whether to the vendor or to anybody else;</li>
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then the legislation will introduce a Clearance Certificate model to provide certainty to purchasers regarding their withholding obligations.
The Clearance Certificate confirms that the withholding tax is not to be withheld from the transaction.  Therefore, in order to avoid an amount being withheld and paid to the Australian Tax Office, the vendor can obtain a Clearance Certificate from the ATO when the asset is being disposed of.  The ATO will issue a Clearance Certificate where they have no reason to believe the vendor is or will be a foreign resident during a specific period, including the time the transaction is entered into.  It is the vendor’s responsibility to obtain this Clearance Certificate and provide it to the purchaser at or before settlement.
At the moment, there is an approximate delay of 6 weeks in obtaining a Clearance Certificate and we recommend to vendors to obtain a Clearance Certificate as soon as possible, if they are intending to sell the Australian real property on or after 1 July 2016.
Should you require any assistance with this foreign residents’ capital gains withholding tax, then please do not hesitate to contact us for advice and assistance in applying for a Clearance Certificate.
Julian Peters is special counsel &amp; notary public with Aitken Lawyers and can be contacted <a href="https://www.aitkenlawyers.com.au" target="_blank">here</a>.
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Property 101: Foreign residents’ capital gains withholding tax regime

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The Australian Financial Review says Labor's budget forecasts have been undermined by revelations that the Parliamentary Budget Office believes the impact of negative gearing and capital gains tax changes are uncertain enough to make revenue forecasts of low reliability.
Its correspondent Laura Tingle writes Labor is heavily relying on its negative gearing/capital gains tax package to shore up its medium term budget position by raising over $37 billion over the next decade.
The Parliamentary Budget Office was actually asked by the Coalition to model a negative gearing and capital gains policy similar to Labor's policy.
The PBO estimated the policy submitted by the Coalition would raise around $6 billion a year by 2026-27, about $800 million less than Labor's published figures, but with a similar trajectory of increasing revenue from 2019-20 onwards.
Around $2.5 billion of this annual revenue would come from capital gains tax and around $3.5 billion from the negative gearing measures.
Tingle writes it was the first time there has been a reliable breakdown of the split in anticipated revenue collections between the two tax measures, albeit with PBO reflection on the uncertainty over the likely revenues.
"The costing is considered to be of low reliability due to uncertainty surrounding behavioural responses, broader economic impacts and assumptions surrounding the growth in the components of net investment income and capital gains", the costings document says.
"This response does not account for the potential broader macroeconomic implications of this proposal. In addition, the reliability of the costing decreases the further into the future the estimates are projected", PBO says.
An internal briefing for the government noted capital gains tax is seven times more volatile than total tax revenue and 2.5 times more volatile than company tax revenue.
This year's budget papers noted that "forecasting CGT is very difficult".
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