ATO Clearance Certificate – 2025 Property Tax Guide

If you’re selling a property in Australia, there’s one document you should sort out early: the ATO clearance certificate. This certificate tells your buyer that you’re an Australian tax resident for tax purposes, so they don’t need to hold back part of your sale price at settlement.

In 2025, the rules around buyer withholding got tougher: the rate increased to 15% and the old $750,000 threshold was removed for contracts entered on or after 1 January 2025. That means if you don’t provide a valid clearance certificate by settlement, your buyer must withhold 15% of the sale price and pay it to the ATO even on lower-priced properties. This can cause delays, stress and cash-flow problems at the worst possible time. The good news is the certificate is free, valid for 12 months, and you can apply online in a few minutes. Getting it done early helps your sale run smoothly and protects your proceeds

Next Step: The best real estate agents can guide you easily through the new changes, so be sure to use our free service for a personalised selection of the best agents in your area.

What is an ATO clearance certificate?

An ATO clearance certificate is an official letter from the Australian Taxation Office confirming you’re an Australian resident for tax purposes. You give this to the purchaser (usually via your conveyancer or solicitor) on or before settlement so they know they don’t have to withhold tax from the price they pay you. The certificate is free, valid for 12 months, and can be used for multiple sales during that period, as long as your residency status doesn’t change.

If you don’t provide it in time, the buyer is obliged by law to withhold the foreign resident capital gains withholding amount at settlement. That money goes to the ATO and you’ll only sort it out later via your tax return, which can be a nasty shock to your cash flow. Applying early avoids last-minute panic and removes a common cause of delayed settlements.

What is foreign resident capital gains withholding?

FRCGW is a set of rules that make buyers withhold a portion of the sale price if the seller is a foreign resident or doesn’t provide proof they’re an Australian resident (via the clearance certificate). For contracts entered on or after 1 January 2025, the withholding rate is 15%, and the $750,000 threshold has been removed, so the rule applies to all relevant property sales unless an exemption or approved variation applies.

For older contracts (signed on or before 31 December 2024), the previous settings generally apply (12.5% rate and $750,000 threshold). The withholding is based on the price (or market value if not at arm’s length) and is paid by the buyer to the ATO shortly after settlement. These measures exist so the ATO can collect tax from foreign residents who might otherwise leave Australia without paying CGT. Knowing which rate and threshold apply depends on the contract date, so check your paperwork carefully.

Why did the rules change in 2025?

The Federal Government strengthened the FRCGW regime to improve tax compliance on property disposals by foreign residents. The change was announced through the 2023–24 Mid-Year Economic and Fiscal Outlook process and legislated via the Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Act 2024. The law lifted the rate from 12.5% to 15% and removed the $750,000 threshold so more transactions are covered and less revenue is missed. These amendments took effect for contracts entered on or after 1 January 2025. If you’re a first-time seller, the important takeaway is simple: even a mid-priced home needs the certificate now, the old “under $750k is exempt” rule no longer protects you for new contracts. Understanding this early prevents expensive surprises at settlement.

Below are details relevant to your role and background in the real estate sale process.

Impacts on Australian resident property sellers

As an Australian resident property seller, you have the ability to be exempt from the foreign resident capital gains tax.

You are exempt if the property is below $750,000 in value, otherwise, you must provide an ATO clearance certificate to the buyer of your property. They will not be required to withhold 15% of the purchase price for capital gains tax once they have seen the clearance certificate.

If your property is being auctioned off and the final price is unclear, it would be best to seek advice from your real estate agent about your chances of receiving bids over $750,000. Be safe and apply for the clearance certificate to avoid any kind of delay in settlement.

There may be additional charges involved for legal counsel during the process of applying for and sighting the documents, although the clearance certificate application process itself is free.

When there are multiple vendors for the same property, you will each need to apply for your own clearance certificates.

You may delay settlement to obtain a clearance certificate, but only through an agreement between yourself and the purchaser.

If you would like an idea of how much capital gains tax you may have to pay as an Australian resident, have a look at our capital gains tax calculator.

What is foreign resident capital gains withholding (FRCGW)?

The buyer of the property is required to withhold 15% of the purchase price from their payment to you. This amount is then given to the government as part of the foreign resident capital gains tax, losing you 15% of the value of the sold property.

You may also apply for a variation of the tax rate, depending on your individual circumstances. Revenue loss that offsets potential capital gains is one such circumstance. Be sure to apply as early as possible for smooth sale of your property as variation applications are handled manually.

Effects on property buyers

Regardless of your nationality as a property buyer, if the seller does not produce an ATO clearance certificate by settlement date, they are to be treated as a foreign resident. You are required to withhold 15% of the purchase price to be given to the Australian Tax Office.

If there is no clearance certificate given to you, fill out the purchaser payment notification form. This tells the ATO that a transaction will take place where the foreign resident capital gains tax applies. This starts the process of paying the tax to the government. You are required to pay shortly after settlement. Note that payments after the due date may attract extra interest.

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How do I get an ATO clearance certificate?

Applications are free and can be started online on the ATO website here. Once the application form is filled out, you can also lodge it online for faster processing or print and mail/fax the form to the Australian Taxation Office.

Your conveyancer, tax agent or legal practitioner may help you through the process of applying for the ATO clearance certificate. They may even apply on your behalf as your representative depending on their legal training. This may incur additional fees.

You will need some important information before you start. Before you begin the application process, make sure you have:

• Vendor tax file number (TFN) or Australian business number (ABN)
• Vendor details (name, email, phone number, address, etc.)
• Expected contract and settlement dates
• Contact person details (for any additional questions)

When should I apply for an ATO clearance certificate?

Make sure you apply as soon as possible to avoid delaying settlement.

According to the Australian Tax Office website, roughly half of all applications are automatically processed. The ATO will send the certificate within days.

However, the ATO manually processes mail applications and it takes between 14 to 28 days to issue a certificate, depending on complications with the information entered or otherwise. Particularly problematic applications may take even longer to process, and the ATO states that they will not prioritise applications based on how urgently the certificate is needed.

Conclusion

Getting your ATO clearance certificate early is one of the simplest ways to keep your property sale stress-free. It confirms you’re an Australian tax resident and stops buyers from having to withhold 15% of your sale price under the new 2025 rules.

The process is free, takes only a few minutes online, and the certificate lasts 12 months. Sorting it before you list your home means you can focus on what really matters finding the right buyer and getting the best price.

If you’re unsure about your tax residency or selling through a company or trust, your conveyancer or agent can help and guide you through the process.  By picking the best agent, you can be sure that their expertise will guide you through the ATO clearance certificate application process safely.

Which Real Estate Agent is committed to swiftly (and for free!) finding the best agents in your area that excel. Don’t hesitate in calling 1300 66 555 7 or visiting our homepage for more information on quickly securing your perfect agent.

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