As of 1 January 2025, changes to foreign resident capital gains withholding tax now impact all property sales in Australia. If you are selling property, obtaining an ATO Clearance Certificate is essential to avoid withholding tax deductions.
What Has Changed?
Previously, withholding tax applied only to properties valued at $750,000 or more, with a 12.5% rate. Now, the rate has increased to 15% and applies to all property sales, regardless of value. Without a valid Clearance Certificate, buyers must withhold 15% of the sale price and remit it to the ATO.
Why and When to Apply?
An ATO Clearance Certificate confirms a seller is an Australian tax resident and not subject to withholding tax. If you do not have this certificate at the time of sale, the buyer is legally obligated to withhold 15% withholding tax from the payment.
Applying before listing your property is crucial, as processing may take up to 28 days for approval. The certificate remains valid for 12 months, providing your residency status does not change.
Who Needs to Apply?
Each property owner must obtain their own Clearance Certificate. If a property has multiple owners, each must apply separately at a cost of $99 per person. If one owner fails to provide a Clearance Certificate, their portion of the sale proceeds may be subject to withholding tax.
How to Apply?
Applying for an ATO Clearance Certificate is straightforward and can be completed online via the ATO website. Ensure you have all necessary identification and property details ready to avoid delays in processing.
Key Takeaways:
- 15% withholding tax now applies to all property sales unless the seller provides a valid Clearance Certificate.
- Each property owner must obtain their own certificate, even for jointly owned properties.
- Applications can take up to 28 days, so apply well before listing your property.
- Ensure the Real Estate Agent has a copy of the certificate prior to properties placed on the market and the Conveyancer has the certificate for processing as part of settlement requirements.
- Certificates remain valid for 12 months from the date of issue.
- Failing to obtain a certificate may result in funds being withheld, causing potential cash flow issues.
For assistance with your application or tax-related property matters, please contact our team for guidance.
For more information on Clearance Certificates, visit the ATO website: ATO Clearance Certificates for Australian Residents.