New rules that affect all Australian residents selling property are now in place and effective, the Australian Tax Office (ATO) has announced.
Changes to the Foreign Resident Capital Gains Withholding (FRCGW) legislation mean that Australian residents need a clearance certificate from the ATO for all property contracts signed on and after 1 January 2025, regardless of the sale price.
A clearance certificate showing that there is no land tax charged on the land protects a purchaser from any outstanding land tax liability by a previous owner.
Without a clearance certificate, the tax must be withheld from the sale proceeds by the purchaser and paid to the ATO. What’s more, the withholding rate has increased from 12.5% to 15% and the $750,000 property value threshold has also been removed.
How will it work?
Australian residents selling property can apply for a certificate (free of charge) from the ATO – they don’t need to wait until they sign a contract. The seller must provide the certificate to the purchaser before the settlement date.
According to the ATO, each vendor must give their clearance certificate to the purchaser at, or before, the settlement date; if there’s no clearance certificate provided by the vendor at, or before the settlement date, the purchaser must withhold an amount of FRCGW and pay it to the ATO.
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.
For more information on the changes to Foreign Residents Capital Gains Withholding and how the tax works, visit the ATO website.
We hope you have enjoyed this article. It is our pleasure being your real estate agents in Brisbane.
If you would like any assistance or advice, please feel very welcome to get in touch with our Brisbane real estate agents, Brisbane property management team, or Brisbane buyers agents.
