In 2016 the Australian Taxation Office brought in new requirements for property sellers selling or transferring a property must apply for an ATO Clearance Certificate to provide to provide to buyers before the settlement date, in order to assist with the collection of foreign resident’s tax liabilities.
These ATO Clearance Certificates are valid for up to 12 months from the date of issue, so the same one can be used for the same seller entity over a range of contracts.
On 1 July 2017, the threshold for the property value being sold or transferred decreased from $2,000,000.00 to $750,000.00.
Now, as of 1 January 2025, the threshold has decreased to $0.00, which means that a seller is required to obtain and provide an ATO Clearance Certificate for any sale or transfer they enter into, and if not provided, the buyer may withhold and pay to the ATO at settlement an amount of 15% of the purchase price.
What if I currently cannot get an ATO Clearance Certificate?
If you sell your property and you don’t provide the buyer with an ATO Clearance Certificate prior to settlement, then the buyer is required by law to deduct, what used to be 12.5% of the purchase price, is now 15% of the purchase price and pay it to the ATO at settlement. This will mean significant delays in receiving the full sale proceeds for the property, if you are entitled to those funds back from the ATO.
It is important for buyers also to ensure you have a solicitor to check that the correct entity has been provided with the ATO Clearance Certificate or that the correct forms are lodged to pay the Seller’s CGT at settlement. A failure to pay the CGT withholding amount to the ATO may have serious consequences as in addition to liability for the CGT withholding amount, a penalty (equal to the amount required to be withheld) may apply where a Buyer fails to comply with the CGT withholding laws.
How to apply
Simply visit the ATO’s website and complete their online application form to get things started.
Each Seller will need to have a separate application which will only take 5 minutes and you can either download and prepare a paper copy OR the application can be done online here.
What if I am a foreign resident?
If you are a foreign resident selling your property, the buyer will be required to pay 15% of the purchase price to the ATO to be offset against your future CGT liabilities. This should be discussed further with your accountant and you should contact them as soon as possible (even before you put your property on the market).
If you have any questions about ATO Clearance Certificates, please contact our property team to discuss. Our team can assist you through any property questions you may have.
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