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The Australian Taxation Office (ATO) has updated its foreign resident capital gains withholding (FRCGW) regime to include all Australian resident homeowners.
Under the new rules, everyone in Australia selling property must provide a clearance certificate — proving they are an Australian resident for tax purposes — to the buyer at the time of settlement, if not before.
"This is a massive change," Belinda Raso, director and registered tax agent at Tax Invest Accounting, told Australian Broker. "It no longer matters the value of the property."
Previously under the FRCGW, which was originally established in 2017, only foreign property owners and Australian resident property owners with homes valued at $750,000 or more had to have the certificate. The new rules, which went into effect on 1 January 2025, now state that all property contracts dated the first of this year and beyond must have a clearance certificate, regardless of purchase price.
Furthermore, buyers who do not receive the clearance certificate from the seller are required to withhold 15% of the property sale price. Instead, the 15% – up from the previous 12% requirement – will be paid directly to the ATO. The rules apply to all properties, including residential, commercial and vacant land.
A spokesperson from ATO said the requirements are "designed to support the collection of tax liabilities owed by non-residents selling Australian property," but did not elaborate on why the rules have been updated to include all Australian residents.
Raso added that "Most people are already stressed when selling or buying a home. So getting the certificate really has to be on the broker's to-do list to help make things easier."
Applications for the clearance certificate are free and can be found on the ATO's website. Vendor applicants will need to provide their contact details, tax number, date of birth and residency status. The certificate lasts 12 months from the date of issuance and normally takes just a few business days to process.
But Raso suggests applying for the certificate as soon as a homeowner decides to sell his or her home, in case of hold-ups.
"If there's a delay, it can take up to 28 business days to get the certificate," the Queensland-based accountant said. "If there's a settlement before that, the homeowner would have to pay the tax to the ATO."
For an $800,000 home, the median home price in Australia, that equals $120,000 in tax deductions without the form. Residents who did not present a certificate and paid the 15% tax would receive a refund of the amount (minus any outstanding debt with the government) by way of a deduction on their next tax return.
"That could be an 11-month wait," Raso said. "And that's a lot of money to wait until your next tax return to get back."
To help facilitate the process, she said brokers can print out a paper copy to give to clients.
"But they can't fill out the form for the client," Raso said.
Raso added that another common mistake she sees that causes delays is that all owners, if more than one, listed on the property must have a separate clearance form. According to the ATO website, the clearance certificate must be in the seller's name.
"For brokers, it really has to be on your to-do list to get this form for all vendors; it really has to become standard practice moving forward," she said.
