Insights

If you’re an Australian resident selling property, there’s an important legal requirement you can’t afford to overlook. From 1 January 2025, all sellers of Australian property, regardless of the value, must provide a valid Clearance Certificate to avoid having 15% of the sale price withheld under the Foreign Resident Capital Gains Withholding (FRCGW) rules.

Whether you’re selling your family home or an investment property, here’s what you need to know to protect your cash flow and ensure a smooth settlement process.

What is a Clearance Certificate?

A Clearance Certificate is an official document issued by the Australian Taxation Office (ATO) that confirms you are an Australian resident for tax purposes. This certificate tells the buyer (or their conveyancer or solicitor) that no tax should be withheld from the sale proceeds under the FRCGW regime.

This certificate is essential because, without it, the buyer is legally required to withhold 15% of the property sale price and remit it directly to the ATO—even if you are a long-term Australian resident and taxpayer.

Why is This Certificate Required?

The FRCGW rules were introduced to ensure that foreign residents meet their capital gains tax obligations when selling Australian property. However, the rules apply to all sellers unless they can prove residency with a Clearance Certificate.

Previously, these rules only applied to properties sold over $750,000, but from 1 January 2025, this threshold is being removed. This means every Australian property transaction—regardless of value—will fall under this requirement.

What Happens If You Don’t Have a Clearance Certificate?

If you don’t provide a valid Clearance Certificate to the buyer before settlement, 15% of your sale price will be withheld and sent to the ATO. That’s a significant chunk of your proceeds that you’ll need to reclaim later, often months after settlement.

You can still apply for a refund, but this will involve lodging a tax return for the relevant financial year and potentially waiting for the ATO to process the return and issue the refund. This can cause unnecessary cash flow issues, especially if you’re relying on the funds for your next purchase or investment.

How to Apply for a Clearance Certificate

The good news is that applying for a Clearance Certificate is free and relatively straightforward. You can apply online via the ATO website or by following this link to the application directly: Foreign Resident Capital Gains Withholding | Australian Taxation Office

To complete the application, you’ll typically need:

• Your Tax File Number (TFN)
• Your full name and contact details
  • Please be advised, the first and last names on a clearance certificate must match the property’s certificate of title for it be accepted by the purchaser (middle names don’t need to be supplied)
• Details of the property being sold
• Your date of birth and other identification details
• Contract date (or possible contract date) and
• Expected settlement date

It’s best to apply at least 28 days before settlement to ensure the certificate is processed in time. There are three questions that the ATO will ask in the application which may delay processing times:

• Has your residency status changed since your last tax return or will it change before you sell the property?
• Are you holding the property on behalf of a foreign resident or on behalf of other entities that include a foreign resident?
• Have you lodged a tax return for the last two years?

If you think you may have to answer “Yes” to the first two questions or “No” regarding the tax returns, feel free to reach out to our team as soon as possible. That way we have time to discuss your circumstances and how this may impact your clearance certificate application, as well as assist with any outstanding tax return lodgements to help remove that hurdle from the application process and lodge an application 28 days out from settlement.

Once the Clearance Certificate is issued, they are generally valid for 12 months. So even if the contract and settlement date provided above to obtain the certificate falls through, you can still sell the property within 12 months and not be required to apply for a new certificate.

If you’re an Australian resident with property to sell in 2025 or beyond, securing your Clearance Certificate is non-negotiable. Avoid delays, unnecessary stress, and a 15% dent in your settlement funds by applying early.

As business advisors and accountants, we recommend all our clients plan ahead—especially in light of the expanded rules from January 2025. If you need assistance or have questions about your eligibility or application process, don’t hesitate to contact us.

Don’t Risk a Costly Delay — Let Us Help

At Altitude Advisers we work with individuals and businesses across Australia to navigate property sales, tax compliance, and ATO obligations with confidence. If you’re planning to sell a property and want to ensure everything is handled correctly, our team can guide you through the Clearance Certificate application, review your eligibility, and help avoid costly surprises at settlement. Contact us today to get started or speak with an expert so that we can make your property transaction smooth, timely, and stress-free.