Conveyancing and the TASA
Foreign resident capital gains withholding and the tax agent services regime
If you are a conveyancer, you may be aware that new rules apply to vendors disposing of certain taxable Australian property under contracts entered into from 1 July 2016.
You could be impacted by the Tax Agent Services Act 2009 (TASA) if your clients are affected by these new rules.
This means you may need to register with the Tax Practitioners Board (TPB) when assisting your clients to meet the requirements under the foreign resident capital gains withholding measure.
Australian resident vendors selling real property with a market value of $2 million or more, will need to obtain a clearance certificate from the Australian Taxation Office (ATO) prior to settlement, to ensure that the 10% non-final withholding is not withheld from the purchase price.
Foreign resident vendors may apply for a Variation of the withholding rate in certain circumstances.
Purchasers are then required to pay the amount withheld at settlement to the ATO. Depending on whether a conveyancer’s client is the vendor or purchaser, the following foreign resident capital gains withholding forms may need to be completed and submitted to the ATO:
- Clearance certificate application
- Variation application
- Purchaser payment notification.
The TPB considers there are sections of each of these forms that may involve the provision of a tax agent service. If you complete and submit these forms to the ATO on behalf of a client for a fee or other reward, you may need to be registered with the TPB.
Before assisting clients to meet the requirements of the foreign resident capital gains withholding regime, all conveyancers who are not registered with the TPB as tax agents, need to understand what they can or cannot do under the TASA. A summary of what this means for you is provided below.
An Australian legal practitioner who completes and/or lodges the Clearance certificate application, Variation application or the Purchaser payment notification as part of a legal service does not need to be registered with the TPB to undertake this work.
Completing and submitting a Clearance certificate or Variation application on behalf of clients for a fee or reward may constitute a tax agent service which can only be done by a registered tax agent or an Australian legal practitioner.
If your client asks you to complete and submit these forms to the ATO and you are not a registered tax agent or Australian legal practitioner, you need to make it clear to your client that you are the transmitter of data to the ATO and not the provider of a tax agent service. Furthermore, you should advise that you can assist your clients with data entry only and you can undertake the following steps for them:
- provide the client with a hard copy of the relevant form for them to complete (you cannot assist the client to complete the form)
- enter client-provided information from a hard copy form into the ATO’s online environment (for example, data entry)
- transmit the information you have entered into the ATO’s online environment.
Importantly, to provide the above assistance, you need to have appropriate procedures/processes in place to ensure that you are not regarded as providing a tax agent service. Such procedures/processes should include, amongst others:
- providing a mechanism for your client to review the data about to be transmitted and to verify the correctness and appropriateness of that data for transmission (you will need to retain evidence of this verification), or
- you retaining, and providing to the client, a hard copy of the client signed form and evidence of the transmission to the ATO.
Further, you should have an appropriately worded declaration to make it clear to your clients that you are not a registered tax agent or Australian legal practitioner, and if the client is seeking tax related advice to rely on in order to meet their tax obligations, they should seek advice from a registered tax agent or Australian legal practitioner. Ultimately, your clients need to be aware that you are simply the transmitter of data to the ATO and not the provider of a tax agent service.
On 9 May 2016, the Tax Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Regulation 2016 was registered and exempts from the TASA conveyancers who perform certain services relating to the Purchaser payment notification until 31 December 2017.
Until this date you can complete and submit the purchaser payment notification on behalf of clients for a fee without being registered with the TPB as a tax agent or an Australian legal practitioner. The TPB is working with the ATO to ensure a process is established for conveyancers to ensure they are not in breach of the TASA from 1 January 2018.
Summary of the requirements under the TASA and options available to conveyancers (that are not Australian legal practitioners)
|Conveyancer completes and submits form on behalf of client for a fee||Requirement to be registered with the TPB?1||Options available to conveyancers|
|Clearance certificate application||Yes||
Purchaser payment notification*
* This refers to the form on the ATO’s website as at 17 August 2016
No - if the service is provided before 1 January 2018.
If the service is provided before 1 January 2018, you can provide the service to the client without registration with the TPB as a tax agent.
1 The requirement to be registered with the TPB will depend on whether you are providing a tax agent service for a fee or other reward.
2 For more information refer to information under the heading ‘Clearance certificate and Variation application’
Last modified: 13 December 2016