When buying a property, purchasers must withhold 12.5% of the purchase price for transactions above $750,000 unless the vendor has obtained a valid clearance certificate.
Vendors who are Australian residents for tax purposes can avoid having this amount withheld (the foreign resident capital gains withholding (FRCGW) amount) when they have a clearance certificate at or before settlement. The service standard for processing clearance certificate requests is 28 days.
Recently we've been seeing errors with applications when different types of entities require a certificate and must have a legal title to a property being sold.
When a vendor is a partnership, trust or a super fund
The name on the Certificate of Title for the property and the clearance certificate must match and all parties on the Certificate of Title, whether they are individuals or company trustees or partners must apply for the clearance certificate.
When names don’t match, the clearance certificate is not valid and the purchaser is required by law to withhold 12.5% of the purchase price for transactions above $750,000.
Tip: Check the name listed on the Certificate of Title for the property and apply for the clearance certificate in the name of the individual or corporate trustee or partner(s) to match the title.
When a vendor is a corporate trustee
Vendors who are a corporate trustee must be listed in the associate details on the Australian business register (ABR).
Tip: Check the associates’ detailsExternal Link in the ABR are updatedExternal Link with the current corporate trustee details for both the company and the trust. If a corporate trustee doesn’t have a tax file number (TFN), include an attachment in the application providing the details of the relevant trust.
See our website for more information about FRCGW clearance certificates.