Do not forget your ATO clearance certificate

If you are an Australian resident selling Australian real property, obtain an ATO clearance certificate before settlement. For contracts signed on or after 1 January 2025, the previous property-value threshold no longer applies. Without a valid certificate, the purchaser may have to withhold 15% of the sale price and pay it to the Australian Taxation Office.

What is an ATO clearance certificate

The certificate confirms that a vendor is an Australian resident for tax purposes for the foreign resident capital gains withholding rules. It does not decide whether capital gains tax is payable. Its practical purpose is to tell the purchaser that withholding is not required for that vendor.

Who should apply

Australian resident vendors disposing of Australian real property should apply. This includes homes, vacant land and commercial property. Where a property has more than one registered owner, each vendor's position needs to be addressed. Foreign residents generally cannot obtain the standard clearance certificate but may be able to seek a variation of the withholding amount.

What happens without a certificate

If the purchaser does not receive a valid certificate by settlement, the withholding rules can require the purchaser to retain 15% of the purchase price, or market value in some non-arm's-length transactions, and remit it to the ATO. The amount withheld is not necessarily the vendor's final tax liability, but losing access to that money at settlement can create a serious cash-flow problem.

On a $2 million sale, 15% is $300,000. That illustrates why this should be handled early rather than treated as last-minute paperwork.

When should you apply

Apply as soon as you are seriously preparing to sell. The ATO says a certificate is valid for 12 months, so there is usually no need to wait until an offer has been accepted. Some applications are processed quickly, but matters such as incomplete tax records or mismatched details can cause delays.

A practical seller checklist

·       Tell your solicitor or conveyancer early that the property is being prepared for sale.

·       Apply through the official ATO process and make sure names match the title and tax records.

·       Check that every vendor has the required documentation.

·       Give the certificate to the purchaser or their representative before settlement.

·       If residency or ownership is complex, obtain tax and legal advice rather than relying on a general article.

Frequently asked questions

Does the rule apply to a family home?

The ATO says taxable Australian real property requiring a certificate can include a home. The clearance-certificate process is separate from whether a capital gain is ultimately taxable.

How long is a clearance certificate valid?

The ATO states that a clearance certificate is valid for 12 months from issue.

Can I apply before the property is sold?

Yes. Applying early reduces the risk of withholding or settlement stress.

Is citizenship the same as tax residency?

No. The certificate concerns Australian residency for tax purposes. Seek professional advice if your residency is uncertain.

Next step

Preparing to sell on the Upper North Shore? TNRE can help you plan the property and marketing process, while your solicitor, conveyancer or tax adviser handles advice specific to your transaction.