Important Update for Property Sellers: Clearance Certificates Now Required

As of 1 January 2025, all Australian residents selling property must obtain a clearance certificate from the Australian Taxation Office (ATO) to avoid having 15% of the sale price withheld.

This change stems from updates to the Foreign Resident Capital Gains Withholding (FRCGW) legislation, which ensures foreign residents meet their capital gains tax obligations before sale proceeds leave Australia. While Australian residents and citizens are exempt from the withholding itself, they must now provide a clearance certificate to the buyer at or before settlement.

Previously, this legislation only applied to property sales exceeding $750,000. Now, it covers all property transactions, regardless of value.

What Sellers Need to Know

• Who Needs a Clearance Certificate?
  If you sign a contract for sale on or after 1 January 2025, you must obtain a clearance certificate from the ATO. Contracts signed before this date, even if settled in 2025, are exempt.
• When Should You Apply?
  Clearance certificates are valid for 12 months, so you can apply well in advance of finding a buyer. While most certificates are issued within a few days, some can take up to 28 days if there are unresolved tax matters.
• How to Apply?
  Applications can be completed online via the ATO website.

What Happens if You Don’t Have a Clearance Certificate?

Failing to provide a clearance certificate means the buyer is legally obligated to withhold 15% of the purchase price and remit it to the ATO. Any refunds due will only be processed after your income tax return.

Key Takeaway

To ensure a smooth property sale process, apply for your ATO clearance certificate early. Being prepared will save you from unnecessary delays and financial inconvenience.

Paulette Contessi

Director / Licensee

CONTESSI PROPERTIES