If you’re selling property in 2025, a new Australian Taxation Office (ATO) requirement could impact your sale. From 1 January 2025, all Australian residents selling real estate must obtain a Clearance Certificate to avoid having 15% of the sale price withheld at settlement.
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What’s Changing?
This update stems from changes 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 citizens and residents are exempt from this withholding, they must now provide a Clearance Certificate to the buyer before or at settlement to prove their residency status.
Previously, this requirement only applied to property transactions over $750,000—now, it applies to all sales, regardless of value.
Who Needs a Clearance Certificate?
- If you sign a contract on or after 1 January 2025, you must obtain a Clearance Certificate from the ATO.
When & How to Apply
- Apply early – Clearance Certificates are valid for 12 months, so you don’t need to wait until you’ve found a buyer.
- Speak with your conveyancer/solicitor – they may facilitate the application on exchange of Contracts on your behalf.
- Processing times vary – Most applications are approved within a few days, but delays of up to 28 days can occur if there are outstanding tax matters.
- Apply online – Applications are lodged through the ATO website.
What Happens if You Don’t Have a Clearance Certificate?
If a Clearance Certificate is not provided before settlement, the buyer is legally required to withhold 15% of the purchase price and remit it to the ATO. Sellers can only reclaim withheld funds by lodging an income tax return after the sale.
Planning to Sell? Get Prepared Now
To avoid settlement delays and unexpected financial hold-ups, sellers should apply for their ATO Clearance Certificate well in advance of settlement.
At Percival Property, we’re here to guide you through every stage of your property journey. If you’re considering selling, reach out to our team for expert advice on preparing your property and navigating the market.