Selling property in 2025 – don’t risk 15 per cent of your proceeds being withheld

As of yesterday, all Australian residents selling property will need to get a clearance certificate from the ATO or risk 15 per cent of the sale price being withheld.

This follows updates to legislation for foreign resident capital gains withholding (FRCGW).

FRCGW is designed to ensure foreign residents who sell property in Australia pay their capital gains tax obligations before the proceeds of the sale are moved offshore.

It sees a portion of the sale withheld by the ATO and processed when the foreign resident completes their tax return.

Australian residents and citizens are exempt from paying withholding. However, they are required to provide a clearance certificate from the ATO to purchasers, at or before settlement, otherwise 15 per cent of the sale price will be withheld.

Previously the legislation only applied to property sales over $750,000. It now applies to all sales.

What does this mean for sellers?

If you sign a contract for sale on or from 1 January 2025 you need to obtain a clearance certificate from the ATO. This can be done online. (The legislation does not apply to contracts signed before 1 January 2025, where settlement will take place in 2025.)

Do this as soon as possible. Most clearance certificates will be issued within a few days, however some can take up to 28 days to issue.  Delays can occur if you have outstanding tax returns or other unresolved matters with the ATO.

Clearance certificates are valid for 12 months so you don’t need to wait until you accept an offer to apply for one.

What happens if you don’t get a clearance certificate?

If you don’t give the buyer a clearance certificate they are legally required to withhold 15 per cent of the purchase price and pay it to the ATO.

You will only get a refund (if one is due) after your income tax return is processed at tax time.