All Australian residents selling property must obtain a clearance certificate from the ATO or risk having 15% of the sale price being withheld by the purchaser and remitted to the ATO.
The foreign resident capital gains withholding (FRCGW) legislation ensures foreign residents meet their tax obligations before transferring sale proceeds out of Australia.
While Australian residents are exempt from withholding, they must provide a clearance certificate to verify their residency status.
This follows updates to FRCGW legislation which came into effect from 1 January 2025, which ensures foreign residents meet their tax obligations before sale proceeds are transferred offshore.
Previously, FRCGW applied only to sales exceeding $750,000. It now applies to all property sales.
What you need to do:
If you sign a contract for sale on or after 1 January 2025, you must obtain a clearance certificate from the ATO before settlement. Applications can be made online through the ATO and are free.
Certificates are valid for 12 months, so applying early ensures preparedness for future sales. You will need to ensure legal name matches both the Certificate of Title and ATO records to avoid unnecessary delays.
The legislation does not apply to contracts signed before 1 January 2025, even if settlement occurs later.
Apply for your certificate as soon as possible! Most are issued within a few days, but some can take up to 28 days, particularly if there are outstanding tax matters.
Clearance certificates are valid for 12 months, so by applying for a clearance certificate in advance, you can avoid unnecessary financial disruptions and settlement delays.
What happens if a seller is non-compliant?
If a clearance certificate is not provided at settlement, the purchaser is legally required to withhold 15% of the sale price. Sellers can only recover the withheld amount after filing a tax return. This delay may significantly impact those relying on sale proceeds for new property purchases or financial commitments.
Realmark is committed to guiding sellers through this transition. Proactive planning is essential - whether actively selling or considering a sale of commercial or residential property.
Applying for a clearance certificate now can prevent settlement delays and ensure peace of mind.
For more information, contact your local Realmark expert today to discuss how these legislative changes may affect your next property sale and how we can help you navigate the process with ease.