Starting from 1 January 2025, every property sale in Australia will require an ATO Clearance Certificate, no matter the property’s sale price. If the seller is a foreign resident, they’ll need to apply for a withholding variation instead. Understanding these changes is crucial to avoid unnecessary tax withholding and settlement delays.

Understanding the ATO Clearance Certificate and FRCGW Rules

An ATO Clearance Certificate is a document that confirms a property seller is an Australian resident for tax purposes. When you provide this certificate to the buyer, it tells them that they are not required to withhold any part of the sale price under the Foreign Resident Capital Gains Withholding (FRCGW) rules.

Suppose the seller fails to supply a valid certificate before settlement. In that case, the buyer is legally obliged to hold back part of the sale proceeds and pay it directly to the Australian Taxation Office (ATO). This can occur even if the seller actually lives in Australia and pays Australian tax, which makes obtaining the certificate well before settlement essential.

Key Changes to Property Withholding Rules in 2025

From 1 January 2025, the Federal Government is tightening the Foreign Resident Capital Gains Withholding rules. The key changes are:

  • The $750,000 sale price threshold has been scrapped. Every sale of taxable Australian real property is now captured, regardless of the value.
  • The withholding rate is increasing from 12.5% to 15%.
  • The new rules cover residential properties, commercial real estate and even vacant land.

In short, every property seller must deal with the clearance certificate or variation process before their sale can be finalised.

Why These Changes Matter: Avoiding 15% Withholding

If a buyer does not receive a valid clearance certificate, they must withhold 15% of the total purchase price and pay it to the ATO. For example, on a $600,000 property sale, that’s $90,000 withheld. On a $1.2 million sale, it jumps to $180,000.

This money is held by the ATO until you lodge your next tax return, where you may be able to claim some or all of it back depending on your tax situation. However, that means less cash available at settlement and a delay in accessing those funds, which can cause financial strain during an already busy time.

Who Needs to Apply: Certificate vs. Variation

The type of form you’ll need depends on whether you’re an Australian resident or a foreign resident for tax purposes.

Australian Residents: Obtaining a Clearance Certificate

  • Must provide a valid Clearance Certificate to the purchaser before or at settlement.
  • Each joint owner of the property must obtain their own certificate.
  • The ATO issues these certificates free of charge, and they remain valid for 12 months from the issue date.

Foreign Residents: Applying for a Withholding Variation

  • Cannot apply for a Clearance Certificate.
  • Instead, they may apply for a “Variation to the Amount to Be Withheld” (Form NAT 74883).
  • The ATO can reduce or adjust the 15% withholding rate based on the seller’s expected capital gain or overall tax position.
  • In some cases, the rate can be reduced to zero if no tax liability will arise.

Foreign residents may seek a variation for several reasons, such as:

  • The sale results in a loss or very small gain.
  • A capital gains tax discount or rollover relief applies.
  • The property is jointly owned with Australian residents.
  • An exemption is available under a tax treaty with another country.

Consequences of Non-Compliance and Delays

If you do not provide a clearance certificate or variation notice before settlement, the buyer must withhold 15% of the sale price and send it to the ATO. This reduces the amount you receive at settlement straight away.

You will then need to lodge a tax return later to claim a refund, which can delay access to your money. Most buyers will not risk ignoring these rules, since they face penalties if they fail to withhold when required. As a result, settlements typically won’t proceed without the correct paperwork in place.

How A Plus Accountant Can Simplify Your Property Sale

At A Plus Accountant, we help sellers navigate these updated rules with confidence and ease. Our team handles every step to ensure your sale goes smoothly and your funds aren’t unnecessarily tied up with the ATO. We can assist by:

  • Confirming your tax residency status and determining whether you need a Clearance Certificate or a variation.
  • Preparing and lodging the correct ATO forms on your behalf.
  • Liaising with your conveyancer or solicitor to make sure all documents are in order before settlement day.
  • Reviewing your potential Capital Gains Tax (CGT) obligations and helping you access available exemptions or concessions.

We make the process straightforward, so you can focus on finalising your property transaction without stress or confusion.

The Key Takeaway for All Australian Property Sellers

From 1 January 2025, every property sale in Australia will fall under the Foreign Resident Capital Gains Withholding regime. Whether you’re selling a house, apartment, business property, or land, action is required to avoid a 15% withholding at settlement.

  • If you’re an Australian resident, you’ll need to obtain an ATO Clearance Certificate before settlement.
  • If you’re a foreign resident, you should apply for a Withholding Variation Notice if you’re eligible.

Acting early helps prevent settlement delays and ensures you retain access to your full sale proceeds.

Need Expert Assistance? Contact A Plus Accountant Today

The new rules can feel complex, especially when timing is tight and paperwork needs to be coordinated between multiple parties. That’s where A Plus Accountant can help. Our team specialises in structure setup and accounting for individuals and businesses across Australia, and we’re experienced in managing ATO compliance for property transactions.

If you’re planning to sell property in 2025 or beyond, get in touch with us today. We’ll make sure you meet all the new requirements, avoid unnecessary withholding, and understand any CGT implications before you sign the contract.

Visit aplusaccountant.com.au or give our team a call for professional, reliable support before your next property sale.