ATO clearance certificate

Understanding the ATO Property Clearance Certificate

If you’re selling property in Victoria, you may have heard about the ATO clearance certificate. But what exactly is it and why does it matter?

At Haitch Convey, we help our clients navigate all the legal and tax obligations involved in selling residential and commercial real estate. One of the most common (and misunderstood) requirements is the ATO clearance certificate. It is especially important now, with recent updates from the Australian Taxation Office (ATO).

Here’s everything you need to know about obtaining a valid clearance certificate and avoiding unnecessary delays or hefty tax penalties at settlement.

Why You Need an ATO Clearance Certificate

An ATO clearance certificate is an official document issued by the Australian Taxation Office confirming that the property seller is an Australian resident for tax purposes. It applies to any sale of real property and is essential to avoid the Capital Gains Withholding (FRCGW) rules that were designed to ensure foreign residents meet their capital gains tax obligations.

If you’re a resident selling Australian property and you don’t provide a valid clearance certificate, the buyer is legally required to withhold 15% of the purchase price and pay it to the ATO.

Recent Changes to Capital Gains Withholding (Effective 1 January 2025)

As of 1 January 2025, the ATO has made the following changes:

• • The withholding rate has increased from 12.5% to 15%.

• • The previous $750,000 threshold has been removed. The new rules apply to all Australian property sales, regardless of property value.

This means that every Australian resident selling property must obtain and provide a clearance certificate before settlement. If you don’t, the buyer must withhold 15% of the sale proceeds.

(Source: ATO – Foreign Resident Capital Gains Withholding)

What Happens Without a Clearance Certificate

If a seller fails to provide a valid clearance certificate on or before the settlement date, the buyer is required to withhold 15% of the sale price and remit it to the ATO. This amount becomes a credit for the seller and can only be reclaimed by lodging an income tax return.

Asset Types Requiring an ATO Clearance Certificate

The rule applies to all types of real estate. Including:

• • Residential property: houses, units, townhouses, and apartments

• • Commercial property: offices, warehouses, retail shops

• • Vacant land: both residential and commercial-zoned parcels

• • Leasehold interests: where the remaining term exceeds 50 years

• • Mining, quarrying, or prospecting rights: where the material is to be extracted from land in Australia

• • Indirect interests in Australian real property: including certain shareholdings and unit trusts

Learn more at the ATO’s page on Foreign Resident Capital Gains Withholding.

If you’re unsure whether your asset type qualifies as taxable Australian property, we recommend speaking with a conveyancer or tax professional. At Haitch Convey, we ensure that all applicable property types are reviewed for compliance before settlement to help you avoid capital gains withholding (FRCGW) errors.

Exclusions to the ATO Clearance Certificate Requirement

While most property sales require a clearance certificate, there are limited exclusions. These include sales where the vendor is:

• • An entity that is fully income tax exempt (such as certain charities)

• • Selling assets not classified as taxable Australian property under ATO definitions

Exemptions are rare so most individual property owners should assume they are required to provide a clearance certificate unless confirmed otherwise. Your conveyancer can help clarify if your situation.

Validity of the ATO Clearance Certificate

Once issued, an ATO clearance certificate is valid for 12 months from the date of issue. If the property sale does not proceed during that time, there is no obligation to cancel or withdraw the certificate. However, a new certificate must be obtained if the validity period lapses before settlement occurs.

This validity ensures peace of mind for sellers and simplifies the administration process for conveyancers and purchasers.

How to Apply for an ATO Clearance Certificate 

The process is straightforward. Sellers can apply online via the ATO website. Applications are free, but processing can take up to 28 days, so it’s crucial to apply early. Each seller listed on the property title must submit their own clearance certificate application.

1. 1. Visit: Apply for a clearance certificate
   2. Provide your residency status, tax details, and contact information
   3. Certificates are valid for 12 months from the date of issue

Helping You Navigate Clearance Certificates with Confidence

At Haitch Convey, we regularly assist clients with:

• • Ensuring clearance certificate applications are submitted early

• • Identifying if a variation notice is more appropriate

• • Helping income tax exempt entities understand their obligations

• • Avoiding settlement delays through proactive communication with all parties

Our role is to make sure you meet your legal requirements and settle on time with confidence.

Need Help With Your Clearance Certificate?

At Haitch Convey, we handle the process from start to finish. Whether you’re selling your family home, an investment property, or managing a complex sale due to a relationship breakdown, we’ll ensure your ATO clearance certificate is lodged early to avoid any disruption.

Contact us today to get started or visit our services page to learn how we simplify every step of the process.

Frequently Asked Questions