New tax rules require clearance certificates for Australian property sales

24 March 2025

The ATO has recently changed its requirements for Foreign Resident Capital Gains Withholding tax.

Prior to 1 January 2025, property transferred with a value of $750,000 or more required each vendor to provide the purchaser with a “Clearance Certificate” on or before the settlement date. Failure to provide the purchaser with a Clearance Certificate meant that 12.5% of the sale price was withheld at settlement and paid to the ATO out of the vendor’s settlement funds. If the property was under the $750,000 threshold, a Clearance Certificate was not required.

As of 1 January 2025 the following key changes were implemented by the ATO:

1. Removal of the $750,000 threshold: Now, all property sales, irrespective of their value, require the vendor to obtain an ATO Clearance Certificate.
2. Increased Withholding Rate: The withholding rate has increased from 12.5% to 15% of the property’s sale price.

These changes aim to enhance the ability to collect tax liabilities from non-residents selling Australian properties. However, they also impose new obligations on Australian resident vendors to obtain and provide Clearance Certificates to avoid financial penalties.

Following are some of the frequent questions we receive and our responses:

1. I’m not a foreign resident, do I still need to apply for a Clearance Certificate? Yes – you do. The Clearance Certificate effectively confirms for the purchaser that you are not a foreign resident and no withholding tax has to be paid at settlement.
2. I haven’t signed a contract yet, can I apply for a Clearance Certificate? Yes – you can. If you know that you are selling your property in the near future (for example if you are selling at auction) you can apply for a Clearance Certificate without a signed contract. Clearance Certificates usually last for 12 months.
3. I am selling more than one property, do I need to apply for a Clearance Certificate for each property? As long as the registered owners are the same, and your Clearance Certificate if still valid – then no, you don’t. If you own one property in your individual name and another in your company name, then you would be required to obtain two separate Clearance Certificates.
4. How long does a Clearance Certificate take to issue from the ATO? Normally once we submit your application to the ATO, the Clearance Certificate comes back within 24 hours, however the ATO says to allow 28 days. Delays can be caused by the taxpayer not having submitted a tax return within the last 2 years, and if your residency status has changed or will change. Sometimes clients legal names with the ATO differ from their name on the title for the property, which can also cause delays in the certificate issuing.

Our staff apply for and receive Clearance Certificates on behalf of clients every day and are experienced in preparing the application form and assisting clients answer the form correctly. Sometimes though, clients prefer that their accountants apply for the certificate instead and in that case we can liaise with your accountant to get the job done.

As we cannot give tax advice, if you are unsure of your tax return status or residency we recommend that you speak to your accountant.