The new legislation requires sellers of residential and commercial properties for more than $2 million to present the buyer with a “clearance certificate’’ before they can be paid the full sale price. Picture: Supplied.

New legislation which comes into affect on July 1, requires sellers of residential and commercial properties for more than $2 million to present the buyer with a “clearance certificate’’ before they can be paid the full sale price.

The certificate is to prove the seller is an Australian resident.

Without a certificate the buyer has to withhold 10 per cent of the purchase price — so a minimum of $200,000 — and send it to the ATO “without delay’’ or risk paying interest.

At the time the legislation was passed through Parliament in February, the Minister for Small Business and Assistant Treasurer, Kelly O’Dwyer, said the aim was to improve the compliance with Australia’s foreign resident capital gains tax regimen.

She said voluntary compliance by foreign residents was “extremely low” and was difficult once the transaction was completed as the proceeds of sale may have already been transferred overseas.

Real estate agent Patrick Dixon is concerned the onus of proof is now on sellers to prove they are Australian residents. Pictured: Supplied.Source:News Limited

Brisbane real estate agent Patrick Dixon was concerned the changes put the onus on “innocent buyers’’ to solve the Government’s problems with gathering capital gains tax on property sold by foreign owners.

While he agreed foreign resident sellers should definitely have to pay the tax, Mr Dixon said buyers shouldn’t have to take on the burden of making sure that happened.

“Suddenly, it is up to us to prove we are Australian residents,’’ he said.

“Forget the fact you might have been born here, or have lived here for years diligently paying taxes. No-one will believe you now unless you have a document to prove it.’’

Mr Dixon said it was another layer of paper work being foisted on the real estate industry.

He accepted that wrongdoers had to be brought into line, but begrudged the imposition on every one else.

“With negative gearing also in the crosshairs, the property market seems to be copping it from all directions. Just because authorities have allowed foreign investors to go crazy buying Australian real estate, we are now all to be penalised,’’ he said.

Property Council of Australia chief executive Ken Morrison said he could understand the goal of the government was to ensure it collected the appropriate tax it was owed.

“Industry has worked closely with the ATO to ensure the new clearance certificate measures are streamlined and do not interfere with the natural process of commercial transactions,’’ he said.

“We will be keeping a close eye on the regimen as it comes into full effect on July 1 to ensure the promise of a seamless process is delivered and the system works efficiently to avoid any disruption in the market.

Accountant Steven Gagel of Prosperity Advisers Group said buyers and sellers needed to be aware that it was a way the ATO could start farming details about transactions in real time instead of further down the track.

He said there was a risk the ATO could try and put a caveat on the proceeds of a sale of property if they were alerted that someone with a tax bill was selling.

Belle Property agent Kathy McPhie was worried that agents really didn’t know much about the whole process and yet it would come into affect next month.