Russell Kelly & Associates · Norwest NSW
Withholding Certificate
Foreign Resident Capital Gains Withholding and Clearance Certificates
When Australian real property is sold, the foreign resident capital gains withholding rules may require the purchaser to withhold part of the sale price and pay that amount to the Australian Taxation Office.
These rules are designed to assist the collection of Australian tax liabilities from foreign resident vendors disposing of certain taxable Australian property.
Current Withholding Rate
For relevant property transactions entered into on or after 1 January 2025, the foreign resident capital gains withholding rate is 15%.
The previous property-value threshold no longer applies. This means the clearance certificate requirements can be relevant regardless of the sale price of the Australian real property.
Australian Resident Vendors
An Australian resident vendor selling taxable Australian real property should generally obtain an ATO clearance certificate if they want to prevent the purchaser from withholding part of the purchase price at settlement.
The clearance certificate confirms that withholding is not required for that vendor for the period covered by the certificate.
The certificate must be provided to the purchaser on or before settlement to prevent withholding.
When Should a Clearance Certificate Be Obtained?
A clearance certificate application should be lodged as early as practical before settlement.
The ATO advises that processing can take up to 28 days in some cases, so vendors should not leave the application until immediately before settlement.
A clearance certificate is generally valid for 12 months from the date it is issued.
Each Vendor Requires Their Own Certificate
Where a property has more than one vendor, each vendor who requires a clearance certificate must generally obtain their own certificate.
The entity that holds legal title to the property is the entity that must apply for the certificate.
Foreign Resident Vendors
A foreign resident vendor cannot obtain an Australian resident clearance certificate.
Where withholding applies, the purchaser may be required to withhold the applicable amount from the sale proceeds and pay it to the ATO.
A foreign resident vendor may be able to apply to the ATO for a variation of the withholding amount in appropriate circumstances.
How the Withholding Works at Settlement
If the required clearance certificate has not been provided, the purchaser may be required to withhold the relevant amount from the transaction and pay it to the ATO.
The amount withheld is not necessarily the vendor’s final tax liability. A vendor may be entitled to claim a credit for the amount withheld when lodging the relevant Australian income tax return.
Companies, Trusts and Deceased Estates
Clearance certificate requirements can also arise where property is owned by a company, trustee, deceased estate or other entity.
The application should be made by the entity that holds legal title to the property, and additional information may be required depending upon the ownership structure.
Clearance Certificates and Conveyancing
The clearance certificate should be considered early in the property sale and conveyancing process so that any withholding requirements can be identified before settlement.
Learn more about our Property Law and Conveyancing services.
Learn more about PEXA and electronic property settlement.
For current federal guidance, see the Australian Taxation Office information on foreign resident capital gains withholding.
Speak to Russell Kelly & Associates
Russell Kelly & Associates can assist vendors and purchasers with the conveyancing implications of foreign resident capital gains withholding and clearance certificate requirements.
This information is general in nature. Tax residency, withholding obligations and eligibility for a variation depend upon the particular circumstances. Appropriate taxation advice should be obtained where required.