07 3555 6333Property Sellers: How to Avoid Losing 15% of Your Property Sale in 2025
As of January 1st 2025, changes to Australian tax law have made it more important than ever for property sellers to obtain an Australian Taxation Office (ATO) clearance certificate before a sale is settled.
Without this certificate, buyers are legally required to withhold a portion of the sale price and pay it directly to the ATO. If you are a seller, this can result in unexpected financial loss (up to 15% of your sale price).
Understanding the new requirements and securing a clearance certificate before settlement day will help you avoid unnecessary delays and financial complications. Take a look at what an ATO clearance certificate is and what steps you need to take when finalising your house sale.
What is an ATO clearance certificate?
In Australia, the proceeds of property sales are tax-free, if the property is your primary place of residence and if you are a permanent resident.
An ATO clearance certificate confirms you are an Australian tax resident. It ensures that the full proceeds from the sale go directly to you, without any withholding by the buyer.
This requirement applies to the sale of taxable Australian property of any value. As of January 2025, if you don’t provide this certificate, the buyer must withhold 15% of the purchase price and pay it to the ATO.
Recent changes to withholding tax rules
The rules around foreign resident capital gains withholding have become stricter in recent years. Previously, only foreign residents were affected by these requirements, and permanent residents did not need to obtain a clearance certificate.
However, under the updated regulations, all property sellers must now provide a clearance certificate, regardless of their residency status. This change helps ensure tax compliance and prevents foreign sellers from avoiding capital gains tax obligations.
Consequences of not providing an ATO clearance certificate
Failing to secure a clearance certificate before settlement can have serious financial implications. If you fail to provide this certificate, your buyer is legally required to withhold 15% of the sale price and send it to the ATO. The money won’t necessarily be lost for good… if you’re an Australian tax resident you can apply for a refund if you were wrongly subjected to withholding, but this process can take time and create cash flow issues.
To add to this, if your clearance certificate is delayed, it may impact the settlement process, potentially leading to penalties or contract breaches.
How to obtain an ATO clearance certificate when you sell your home
You can apply for a clearance certificate directly through the ATO’s online portal. The process involves submitting an application with details including your tax file number, property information and residency status. In most cases, clearance certificates are issued within 28 days and often sooner, but processing times can vary.
To avoid settlement delays, it is advisable to apply for a clearance certificate well in advance of selling your property. A professional property conveyancer from NPR Law can help streamline the application process and prevent any potential complications.
Secure your clearance certificate with expert guidance
If you’re selling a property in Australia, obtaining an ATO clearance certificate is essential to avoid losing 15% of your sale money to tax.
To side-step this and other setbacks, it makes sense to work with a professional. Let NPR Law’s property conveyancing team guide you through the process so you have a smooth, compliant transaction.
ATO compliance during property sales: NPR Law can help
If you have any questions or would like us to assist you with a property exchange, please call us on 07 3555 6333 or contact us here.