Australian residents and clearance certificates

Clearance certificates for Australian residents

All Australian residents (for tax purposes) selling or disposing of Australian real property (property) must have a clearance certificate and give it to the purchaser at, or before settlement.

Without a clearance certificate, the purchaser must withhold up to 15% of the sale (or market value if not sold at arm's length) for foreign resident capital gains withholding (FRCGW) purposes.

Australian residency

Depending on circumstances, residency can change. We will confirm your residency status when you apply for a clearance certificate.

Individuals

The residency test for individuals for taxation purposes is different to that for social security and immigration purposes.

Generally, an Australian resident for tax purposes is an individual who:

• has always lived in Australia or has come to Australia and lives here permanently
• has been in Australia continuously for 6 months or more, and for most of that time, worked in the one job and lives at the same place
• has been in Australia for more than 6 months of the year, unless their usual home is overseas and they don't intend to live in Australia
• goes overseas temporarily and doesn't set up a permanent home in another country
• is an overseas student in Australia to study and is enrolled in a course that is more than 6 months.

You can work out your tax residency or work out your residency status for tax purposes.

Non-individuals

Different residency tests apply to non-individual entities such as companies, corporate limited partnerships and trusts.

Non-individuals can refer to Working out your residency.

Rate of withholding from a property sale

The following FRCGW rates apply to the market value of property contracts signed:

• Up to and including 31 December 2024, a rate of 12.5% applies to property valued at $750,000 or more.
• On and after 1 January 2025, a rate of 15% applies to the value of all property.

 

Types of property

Taxable Australian real property requiring a clearance certificate includes:

• vacant land, buildings, residential and commercial property
• mining, quarrying or prospecting rights where the material is situated in Australia
• indirect Australian real property interests (IARPI), where the holder has a right to occupy land or buildings on land.

Applying for a clearance certificate

In this section:

• Clearance certificates
• Processing times
• Who can apply on your behalf
• If you don’t have a clearance certificate
• Names on the clearance certificate
• Receiving your clearance certificate
• Lodging tax return for refund
• Invalid or fraudulent clearance certificates

Clearance certificates

Most clearance certificates issue within a few days, but some can take up to 28 days to process and issue. Apply for a clearance certificate as soon as you think about selling a property.

The vendor (or seller) is the entity that owns the legal title to the property.

An ATO-issued clearance certificate confirms the vendor's Australian residency for foreign capital gains withholding.

When selling Australian real property:

• you don't have to wait to sign a contract - apply for a clearance certificate as soon as you are thinking of selling, they are free
• each vendor must give their clearance certificate to the purchaser before the settlement date
• most clearance certificates will issue within a few days, but some can take up to 28 days to process and issue
• if there's no clearance certificate provided by the vendor by the settlement date, the purchaser must withhold an amount of FRCGW and pay it to us
• clearance certificates are valid for 12 months from their date of issue (as long as the vendor's residency status doesn't change during that time)
• if you decide not to sell, but have a clearance certificate, there's no requirement to use it.

If a vendor is a non-individual entity, for example a super fund, partnership, trust or company, see Clearance certificates in certain circumstances.

In certain circumstances, the property can be looked after on behalf of another entity, for example, a trustee for a deceased estate.

Note: When vendors don't have a valid clearance certificate from us at or before settlement, the purchaser must withhold a FRCGW amount from the sale.

Apply for a clearance certificate

If someone else is completing your clearance certificate application, see Who can apply on your behalf.

For more information on how to complete the form, see Capital gains withholding clearance certificate application online form instructions – for Australian residents.

A paper form and instructions are also available. See Capital gains withholding clearance certificate application paper form instructions for more information.

The contract is longer than 12 months

There may be instances where the settlement date is after the expiry date on the vendor's clearance certificate. For example, where an off-the-plan apartment is acquired and the contract period is greater than 12 months.

The purchaser may rely on the clearance certificate being valid as long as the date it's made available to the purchaser is within the clearance certificate period stated on the certificate, and some of this period covers the time the transaction is entered is in effect.

Who can apply

Those who can apply for a clearance certificate include:

• vendors
• legal practitioners
• tax agents
• conveyancers
• real estate agents
• solicitors and registered tax agents representing the vendor on their behalf.

Conveyancers, real estate agents and others charging a fee for services (but who aren't legal practitioners or registered tax agents) should give the vendor a paper application to complete and sign. The representative can use the details on the paper clearance certificate application form to complete the online form, ensuring faster processing, as part of the settlement process.

For more information about a representative's role see Conveyancing and the TASAExternal Link on the Tax Practitioners Board website.

Processing times

Applications must be lodged at least 28 days before settlement to ensure you have your clearance certificate in time.

Each application is processed separately, so members of a couple or group may receive them at different times.

Processing may take longer if:

• the vendor hasn't lodged income tax returns recently
• there's a change in residency status
• the names on our records don't match the names on the Certificate of Title - see Name on the clearance certificate
• the property is owned by complex entity structures and determining the residency takes longer.

If you lodge your application close to the settlement date, we can't guarantee it will be processed by that date.

If you don’t have a clearance certificate

If an Australian resident vendor doesn't provide a valid clearance certificate at or before settlement, the purchaser must withhold a FRCGW amount, even if the Australian resident vendor:

• is entitled to a clearance certificate, but didn't get one
• didn't provide their certificate to the purchaser at or before settlement.

Name on the clearance certificate

The first and last names on the clearance certificate must match the property's Certificate of Title for it to be accepted by the purchaser.

Middle names don’t need to be supplied or matched.

Clearance certificates are issued in the legal name on our system. If the vendor's name has changed, update the vendor's name on our system before applying. In some circumstances, this may not be required – see Name mismatch.

Name mismatch

If the vendor's first and last names on the clearance certificate aren't the same as the Certificate of Title, supply the purchaser with both:

• the clearance certificate
• a proof of a name change (for example, a marriage certificate, or a change of name certificate, issued from an Australian state or territory registry).

If the proof of name change is from an overseas source, you must update your name with us by post. 

We don't reissue certificates for a name mismatch in the above instances.

Title or honorific mismatch

A title (honorific) match isn't required. For example, Susie Tan, is often known as 'Miss' Tan and 'Ms' Tan. The 'title' she uses on her clearance certificate application doesn't need to match the Certificate of Title for the property.

Receiving your clearance certificate

Clearance certificates are sent by email (if it's included in the application).

To get their clearance certificate online, individual vendors can:

• log in to myGov, go to ATO online services
• My profile menu, go to Communication
• then History.

If there's no email address, the clearance certificate is posted to the vendor and their contact using the address in the application.

If you choose to communicate with us via email, be aware the internet isn't a secure environment. We can't guarantee the privacy and security of personal information.

Lodging a tax return to claim a credit

If you don't provide a clearance certificate to the purchaser at, or before settlement and an amount of FRCGW was withheld, you must lodge a tax return to get that amount credited to you – even if your income was below the threshold to lodge.

1. You need a copy of the FRCGW payment confirmation from the purchaser as proof of the amount withheld.
2. When completing your tax return
   • declare your assessable income, including any capital gain or loss from the sale or disposal of the property, if applicable
   • claim a Credit for foreign resident capital gains withholding amounts taken from the sale proceeds.
3. The FRCGW amount will be refunded in full if
   • there are no tax debts
   • there’s no CGT payable on the sale of the property.

A credit for the amount withheld for FRCGW applies to the income year the contract was signed. It may be months later when the vendor can lodge their tax return to declare their capital gain and claim any credit for the amount withheld. This is generally because tax returns can't be lodged before the end of the relevant income year. Any amount due to the vendor will be refunded to them after the tax return is assessed.

If the contract is signed in one income year but the purchaser pays the FRCGW in the next income year, the capital gain and claim for the credit for FRCGW amounts should be included in the income year the sale contract was signed.

Invalid or fraudulent clearance certificates

We can withdraw a clearance certificate at any time if we learn a vendor is a foreign resident (also known as a non-resident).

If a purchaser, in good faith, hasn't withheld FRCGW from the purchase price, they won't be subject to a penalty for failure to withhold.

We will hold the vendor liable for making a false and misleading statement and may prosecute them.

Clearance certificates in certain circumstances

In certain circumstances, there are different requirements for clearance certificates.

In this section:

• Relationship breakdown
• Deceased estates
• Income tax exempt entities
• Trusts and super funds
• Mortgagee sales
• Consolidated groups and multiple entry groups

Relationship breakdown

A clearance certificate (or an FRCGW variation) isn't required when a relationship breaks down, as long as:

• the transfer of property happens under the Family Law Act 1975 or under a relevant state, territory or foreign law
• the transferee has documentation specified in subsection 126-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) by the time of the transfer.

For more information, see PAYG Withholding variation for foreign resident capital gains withholding payments – marriage or relationship breakdownsExternal Link.

Mortgagee sales

When you borrow funds (mortgagor) from a mortgagee (a creditor, such as a bank) and aren't able to repay the loan, the mortgagee can force the sale of the property.

There are 3 situations where this commonly applies:

1. The mortgagor keeps the title to the sale while the mortgagee orders the property be sold but hasn't repossessed the title to the property.
   • The mortgagor must get a clearance certificate. Without a clearance certificate, FRCGW would apply to the sale, unless the mortgagee applies and receives a variation notice.
2. The mortgagee takes possession of the property and sells it, but there's no transfer of title from mortgagor to mortgagee.
   • The mortgagee can apply for a variation notice to have the withholding reduced.
3. Foreclosure, when the mortgagee repossesses and takes the title to the property. FRCGW may apply when the transfer of title is made from the mortgagor to the mortgagee (generally, a sale of the property at market value).
   • The transfer of title from the mortgagee to the final purchaser.

However, if the mortgagee is an Australian Deposit-taking Institution (such as an Australian bank), in some circumstances, the rate of withholding is varied to 0%. For more detail, see PAYG Withholding variation for foreign resident capital gains withholding payments – no residue after a mortgagee exercises a power of sale 2020External Link.

Deceased estates

When the executor or trustee (legal representative) of a deceased estate is selling or disposing of a property, there are some circumstances when a clearance certificate or FRCGW isn't required:

• a beneficiary of the will acquires the property (regardless of their residency)
• a surviving joint tenant acquires the property
• the property is transferred to the legal representative.

If the property is sold or transferred to anyone else, the legal representative must have a clearance certificate, otherwise whoever acquires the property will be required to withhold to FRCGW on their behalf and remit it to us.

When completing a clearance certificate application, the legal representative must include the deceased vendor's name according to the name on the property title. They don’t need to have ‘as executor for’ on the application.

 

For further information, see PAYG Withholding variation for foreign resident capital gains withholding payments – deceased estates and legal personal representativesExternal Link.

Executor of a will is a foreign resident

If the executor of the will is a foreign resident, FRCGW is applicable on the sale of the property.

They can apply for a variation of the withholding amount if:

• they’re not entitled to a clearance certificate
• the withholding amount is more than the Australian tax liability on the sale of the asset.

See Foreign residents and variations for more information.

Income tax exempt entities

A clearance certificate isn't required when a vendor provides evidence they're an income tax exempt entity, provided they have:

• a private ruling issued by us confirming its income tax exemption valid for the income year of the transaction
• documents showing it's a registered charity under item 1.1 of section 50-5 of the ITAA 1997Opens in a new window.

For more information, see PAYG Withholding variation for foreign resident capital gains withholding payments – income tax exempt entitiesExternal Link.

Trusts and super funds

The entity that has legal title to the property applies for the clearance certificate. In most cases this is the trustee who applies in their own capacity as either a company or an individual.

The name on the Certificate of Title and clearance certificate must match.

The trustee must:

• ensure the associates’ detailsExternal Link in the Australian business register are updated and correct
• apply for the clearance certificate
• use one of either
  • the trustee’s tax file number (TFN)
  • their Australian business number as the identifier if applicable.

The clearance certificate is issued in the name that appears on our systems.

Trustee doesn't have a TFN

If the:

• corporate trustee is a company that doesn't have a TFN, attach the details of the trust and the company's Australian company number (ACN) to the application
• trustee is an individual that doesn’t have a TFN, attach the details of the trust’s name with the application. For example, a copy of the trust deed.

For example, this may be needed where the trust is registered in ATO systems as 'The trustee for ABC Trust' where the property title contains 'XYZ as the trustee for ABC Trust', or the clearance certificate only lists the trustee's name.

For assistance in completing the clearance certificate application, use the online instructions.

Consolidated groups and multiple entry groups

Withholding and intra-group transactions

A member of a consolidated group or multiple entry groups that purchases from another member of the group an asset to which the withholding applies is still required to comply with the withholding obligation.

Entity obtaining the clearance certificate

We issue a clearance certificate to the head company or provisional head company of the group, which includes the members of the group as an attachment.

We rely on the group membership information as recorded on our systems. If group membership has changed, it's up to the head company to notify us of these changes before making a clearance certificate request.

Alternatively, subsidiary entities can, in their own right, apply for a clearance certificate and have one issued in their own name.