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ATO Administrative Guidance – Clearance Certificates – Auction related issues

ATO has developed an administrative approach to ensure that vendors can apply for clearance certificates after the date the transaction has been entered into.

Message from the ATO to Legal Practitioners 3 September 2016:

We have had a number of legal practitioners contact us querying the validity of the clearance certificate with respect to section 14-220 of Schedule 1 to the TAA 1953, and the ATO approach. This is the response we have provided, and thought you may wish to be aware of it.

Pursuant to subsection 14-210 of Schedule 1 to the TAA 1953, a purchaser may technically rely on a clearance certificate issued under section 14-220 where (i) the period specified in the clearance certificate covers ‘the time the transaction is entered into’, and (ii) the certificate is provided to the purchaser before an amount is paid to the Commissioner under section 14-200 (e.g. before settlement).

The phrase ‘the time the transaction is entered into’ can be read as ‘the date the contract is exchanged’ and it is not necessary that the time period covered by the clearance certificate covers the completion date.  It is also important to note that clearance certificates are not transaction specific and can be used by an applicant for any number of relevant transactions entered into during the 12 month period.

In addition to technically relying on clearance certificates in the circumstances set out above, the ATO has developed an administrative approach to ensure that vendors can apply for clearance certificates after the date the transaction has been entered into.  Under this approach a purchaser may rely on a clearance certificate where (i) the date the certificate is provided to the purchaser falls within the 12 month period specified in the clearance certificate, and (ii) the clearance certificate was provided to the purchaser prior to the date the purchaser became the owner of the asset (e.g. settlement).

This administrative approach was developed following consultation with stakeholders where the ATO was advised of difficulties that may be faced by vendors selling at auction who do not know before exchange that their transaction would be subject to the withholding requirements (for example, because the ultimate sale price equals or exceeds $2 million).  Our administrative approach addresses this concern by allowing a vendor to apply for a clearance certificate at any stage up to settlement.  Our approach also recognises that the measure is newly enacted and that vendors may not be aware of the legal requirement at contract date.