As of January 1, 2025 all Australians selling property must now obtain a clearance certificate from the ATO or risk facing a 15% sale tax withholding.
A major tax change introduced by the Australian Taxation Office (ATO) is set to impact all property sellers across the country from January 1, 2025. Under the updated rules, all Australians selling property must now obtain a clearance certificate from the ATO—or risk having 15 per cent of their sale price withheld by the buyer and sent directly to the tax office.
Previously, the Foreign Resident Capital Gains Withholding (FRCGW) rules only applied to properties valued at $750,000 or more, and the withholding rate was 12.5 per cent. However, from January 1, the threshold has been scrapped and the withholding rate has been increased to 15 per cent, making the rule applicable to all property sales, regardless of value.
If a seller doesn’t provide a clearance certificate before settlement, the buyer is legally required to withhold 15 per cent of the sale price and pay it directly to the ATO.
For example, with the average home price in Australia sitting at $814,837, sellers who fail to provide a clearance certificate could see $122,225 withheld at settlement. That’s a significant amount of cash to be without until the seller lodges their next tax return to claim the withheld amount as a refund.
The ATO uses this process to ensure that foreign residents meet their tax obligations when selling property. However, under the new rules, all sellers—Aussie residents included—are subject to the same requirements.
Obtaining a clearance certificate is free and can be done via the ATO website.
Director of Tax Invest Accounting, Belinda Raso, advised that sellers should apply early, even if they are just thinking about selling.
“This is free to organise, it just needs to be in the vendor’s name and it’s valid for 12 months,” Raso explained.
“If you don’t proceed with the sale, having the certificate doesn’t impact anything. But if you do proceed, you’ll be covered.”
The clearance certificate process is typically handled by a conveyancer or solicitor, but Raso recommends sellers get ahead of the process to avoid delays at settlement.
The ATO advises that most clearance certificates are issued within a few days, but warns that some may take up to 28 days to process.
Given that the certificates are valid for 12 months, there’s no need to wait until a contract has been signed to apply. The ATO recommends applying as soon as you are considering selling your property to avoid any disruptions to the sale process.
Failing to provide a clearance certificate could leave sellers out of pocket by tens of thousands of dollars until their next tax return is lodged—making it critical to stay informed and prepared ahead of any property sale in 2025.