If you are a non-resident selling property in Australia, it is essential to understand the updated tax obligations under the Federal Government’s legislation. Starting on January 1, 2025, all vendors selling real estate in Australia must obtain a Clearance Certificate from the Australian Taxation Office (ATO) to avoid a 15% withholding tax.
What is a Clearance Certificate?
A Clearance Certificate is an official document issued by the ATO confirming that you are an Australian resident for tax purposes. This certificate ensures that the full proceeds of the sale are received without any tax withheld at settlement.
Why Do You Need a Clearance Certificate?
Under the Foreign Resident Capital Gains Withholding (FRCGW) rule, if a seller fails to provide a valid Clearance Certificate before settlement, the buyer is legally required to withhold 15% of the total sale price and remit it to the ATO. This applies to both Australian and foreign residents.
When Should You Apply?
Previously, vendors were advised to apply for the certificate after selling their property. However, due to ATO processing times of up to 28 days, it is now recommended that you apply immediately when you decide to sell.
How to Apply for a Clearance Certificate
Applying for a Clearance Certificate is a straightforward process:
- Visit the Australian Taxation Office (ATO) website.
- Select Clearance Certificate Application for Australian Residents.
- Complete the online form, ensuring you provide your Tax File Number (TFN)and a valid email address.
- Save the form or print it as a PDF.
- Forward a copy of your completed application to your file owner or legal representative.
Processing Time & Next Steps
Once submitted, the ATO will issue the certificate within 28 business days. After receiving it, provide a copy to the buyer’s representative before settlement to ensure there are no unnecessary deductions from your sale proceeds.
What Happens If You Don’t Obtain a Clearance Certificate?
Failure to obtain and provide a valid Clearance Certificate before settlement means that the purchaser must withhold 15% of the total sale price and send it directly to the ATO. This can significantly impact the amount you receive from the sale.
Can Someone Apply on Your Behalf?
While we cannot lodge the application on your behalf, a registered tax agent or accountant can assist you with the process. If you have an accountant you regularly work with, we recommend reaching out to them for guidance. If you are looking for recommendations to a great tax agent, please reach out to us.
Important Links
For more information and to apply for a Clearance Certificate, visit:
- Foreign Resident Capital Gains Withholding | Australian Taxation Office
- Clearance Certificate Application for Australian Residents | Australian Taxation Office
Final Thoughts
Selling property in Australia as a non-resident comes with specific tax obligations. By applying for a Clearance Certificate early, you can ensure a smooth settlement process and avoid unnecessary deductions. If you have any questions or require further assistance, feel free to contact us.
Reach out to MW Buyer Advocates if you need any help organising the sale of your property.
