As of 1 January 2025 significant changes to the Foreign Resident Capital Gains Withholding (FRCGW) legislation came into effect. These changes affect all Australian residents selling property, regardless of the sale price.
When you sell property in Australia, you are required under the terms of the Contract to give the Buyers an ATO Tax Clearance Certificate prior to settlement.
Previously this requirement only applied where the purchase price was over $750,000.00. Since 1 January 2025 this requirement applies to ALL property sales, irrespective of the purchase price.
What is an ATO Tax Clearance Certificate? This certificate is confirmation from the Australian Tax Office (the “ATO”) that the Buyer is not required to pay part of the sale funds directly to the tax office on behalf of one or more of the Sellers.
If an ATO Tax Clearance Certificate is not provided for each Seller prior to settlement, then the Buyer’s legal representative must pay to the ATO 15.0% of the purchase price directly to the ATO at settlement out of your sale funds.
So if you sell your property for $750,000.00, and you don’t provide an ATO Tax Clearance Certificate to the Buyer, 15.0% of $750,000.00 adds up to $112,500.00 that is deducted from your sale proceeds and paid to the tax office on settlement.
If you sell your property for $1,000,000.00, 15.0 deducted at settlement is a whopping $150,000.00.
Obviously the higher the sale price, the higher the amount to be withheld.
The good news is it is easy to obtain an ATO Tax Clearance Certificate. The quickest way to apply is online directly through the ATO website. Clearance Certificates can take up to 28 days to issue so we recommend applying as soon as practicable. An ATO Tax Clearance Certificate will remain valid for 12 months from the date of issue so even if your first sale Contract fails to proceed to settlement, the certificate will in most instances remain valid for the duration of a subsequent sale Contract.
You will need the following information to complete the online form to apply for an ATO Tax Clearance Certificate:
- Tax file number for each of the Sellers;
- ABN if the Seller is a Company;
- Contact details for each of the Sellers (address, email, phone number);
- Date of Contract (or expected Contract Date if there is no signed Contract yet);
- Anticipated Settlement Date.
You must apply for a separate ATO Tax Clearance Certificate for each of the registered owners on the property title (who should be the same as the Sellers named in the Contract). If the property is registered in two or more individual names, then you will need to provide two ATO Tax Clearance Certificates – one for each person.
If you are selling property as the personal representatives (the executors or administrators) of a deceased estate then you must apply for an ATO Tax Clearance Certificate for each individual personal representative named on the property title.
If the property title is registered in the name of a Company then the registered entity must still provide an ATO Tax Clearance Certificate prior to or at settlement.
For assistance with obtaining an ATO Tax Clearance Certificate please contact your conveyancer directly or phone our office on 07 5445 0544.
