If you’re thinking of selling a property in 2025, there’s an important legislative update you need to be aware of – the potential withholding of 15 percent of your sale proceeds by the Australian Tax Office (ATO).
As of 1 January 2025, all Australian residents selling property will need to obtain a “Clearance Certificate” from the ATO or risk having 15 percent of the sale price withheld at settlement.
This follows updates to legislation for Foreign Resident Capital Gains Withholding (FRCGW), which ensures foreign residents meet their capital gains tax obligations before sale proceeds leave Australia. While FRCGW is designed to address foreign resident transactions with Australian residents and citizens exempt from paying withholding tax, they must provide a valid Clearance Certificate to the buyer at or before settlement. Previously, this was only necessary for sales over the value of $750,000, however it now applies to all property sales.
How to Apply for a Clearance Certificate
To ensure a smooth settlement process, apply for a Clearance Certificate early. Clearance Certificates can be applied for online via the ATO. Most are issued within a few days, but delays of up to 28 days can occur if there are unresolved tax matters, such as outstanding returns. Importantly, Clearance Certificates are valid for 12 months, so sellers don’t need to wait until they receive an offer to start the application process.
What Happens if You Don’t Have a Clearance Certificate?
If a Clearance Certificate isn’t provided to the buyer, they are legally obligated to withhold 15 percent of the purchase price and further pay it directly to the ATO. Any refund owed will only be processed after the seller lodges their income tax return.
At White House Property Partners, we are here to help you through every step, ensuring you’re informed and well-prepared. If you are looking to sell now or in the future or would simply like a confidential discussion about what we could achieve for your property for sale or lease in the current market, please reach out. We’d love to help you.
