IMPORTANT: Changes which will impact all sellers from 1 January 2025

Capital Gains Withholding Changes from 1 January 2025

Currently, if a property is being sold, and the price is over seven hundred and fifty thousand dollars ($750,000), the seller is required, prior to settlement, to obtain from the Australia Taxation Office a clearance certificate.

This certificate confirms that either:

  1. the seller is not a foreign resident, and therefore not required to pay their capital gains tax at settlement; or

  2. if the seller is a foreign resident, then they are required to pay 12.5% of the purchase price to the ATO at settlement.

The ATO have announced changes to this; and for all contracts dated 1 January, 2025 onwards:

  1. all sellers are required to obtain this clearance certificate from the ATO prior to settlement, regardless of the price the property is sold for; and

  2. the amount to be paid will increase to 15%.

How do sellers obtain a certificate?

The process to obtain the certificate is quite simple.

There is an online form on the ATO website, that is completed with the sellers’ details, including their tax file number, and the basic details of the contract.

Typically, if the seller has been lodging their tax returns on time; then the certificate will issue from the ATO within a couple of days. However some certificates can take up to 28 days for the ATO to issue; as such it is important that the seller lodges this form as soon as the contract is signed.

When the seller obtains the certificate, it is valid for 12 months, therefore, if one contract does not proceed, then this same certificate may be used for the next contract (provided it falls within that 12 month period).

If the seller is unable to obtain the clearance certificate prior to settlement, then the buyer’s solicitor is required to deduct 15% of the purchase price from the funds the seller is due to receive, and instead, pay that amount to the ATO, regardless of whether the seller is a foreign resident or not.

This could be a very costly exercise for the seller, as it may mean they have insufficient funds at settlement to release any mortgage, causing settlement delays.

Need help?

We are happy to assist sellers in locating and lodging the ATO form, if they are unable to access the online form themselves.

Please do not hesitate to contact our office if you have any questions regarding the updated ATO requirements.

For Sellers, For AgentsFiona Hollingworth