ATO bombshell is a fresh blow to Asian buyers and the property market

Thousands of real estate agents and property owners around Australia are about to get a terrible shock when they deal in property valued at more than $2 million.

On the day before the Federal election, Friday July 1 2016, the rules for transacting dwellings and commercial property worth more than $2m will change dramatically.

In short, all Australian sellers of $2m-plus properties will be classified as overseas investors unless they get a special tax clearance. That means that all buyers of $2m-plus properties must deduct 10 per cent from the purchase price and pay that amount to the Australian Taxation Office (ATO) unless the seller has a tax clearance.

Chinese and Asian buying of Sydney apartments has already fallen 50 per cent in recent weeks and the trend is spreading to other markets, particularly Melbourne. This new measure, as well as creating chaos for locals, may accelerate the decline in the Chinese buying of apartments (Dramatic shifts herald a new era in residential property, May 12).

The current mess was created when former treasurer Joe Hockey caved into pressures to curb Chinese investment in Australian residential property in 2015. In the process, the treasurer was convinced by the Australian Taxation Office to widen the net to cover local residents.