If you’re planning to sell your residential property in 2025 or beyond, there’s an important new tax requirement you need to be aware of.
As of 1 January 2025, the Australian Taxation Office (ATO) has made it compulsory for all property vendors—regardless of sale price—to provide a clearance certificate to avoid automatic tax withholding at settlement.
This change marks a major shift in how residential property transactions are handled, and it’s critical that you understand what’s required to ensure a smooth settlement.
What’s Changed?
Under the Capital Gains Tax (CGT) Withholding Regime, purchasers of property must withhold a percentage of the sale price and remit it to the ATO unless the vendor provides a valid clearance certificate proving they are not a foreign resident for tax purposes.
Previously, this requirement only applied to properties with a market value above $750,000. But from 1 January 2025, that threshold has been abolished.
Now, the rules apply to all property sales, no matter the price.
Key Points You Need to Know
- 15% of the purchase price will be withheld at settlement if a valid ATO clearance certificate is not provided by the vendor.
- This applies to all residential property sales, including homes, units, and vacant land.
- The requirement applies to Australian citizens and residents too, not just foreign owners.
- The clearance certificate must be obtained before settlement.
What Is a Clearance Certificate?
An ATO clearance certificate confirms you are an Australian resident for tax purposes and not subject to CGT withholding. It is valid for 12 months and can cover multiple property sales within that period.
Without this certificate, your purchaser is legally required to withhold 15% of the sale price and pay it directly to the ATO—money that you may only recover later by lodging a tax return.
Why This Matters to You
Failing to provide a clearance certificate could cause:
- Settlement delays
- Cash flow issues (if 15% of your sale price is withheld unexpectedly)
- The need to lodge a tax return to claim a refund, which may take months
This obligation applies even if you are an Australian citizen and the sale is under $750,000.
What Should You Do Next?
If you’re thinking about selling:
- Apply for an ATO clearance certificate early (ideally when you list your property or as soon as a contract is signed).
- Talk to your conveyancer or legal representative (like our team at Hayton Kosky) to ensure the certificate is lodged and available in time.
- Don’t assume you’re exempt, even if your property is modestly priced.
Need Help?
At Hayton Kosky, we assist vendors with all aspects of residential property sales, including preparing and lodging clearance certificates with the ATO.
Our goal is to ensure your sale proceeds smoothly and without unexpected surprises at settlement.
Contact us today if you’re planning to sell and want to ensure you’re fully compliant with the latest ATO requirements.
This blog is general information only and does not constitute legal or tax advice. For advice tailored to your situation, please contact our team directly.