Sell a property in Australia without an ATO clearance certificate and the buyer must hand 15% of your sale price straight to the tax office. Not 15% of your profit. Fifteen per cent of the whole sale price.
On a $900,000 sale, that’s $135,000 gone at settlement.
The rule used to apply only to expensive property. It doesn’t any more, and most sellers have no idea it changed.
What Is an ATO Clearance Certificate?
An ATO clearance certificate proves you’re an Australian resident for tax purposes, which tells the buyer they don’t need to withhold anything from your sale. Every seller of Australian property now needs one, including people selling their own home. Hand it to the buyer on or before settlement day and the full sale price comes to you.
The formal name is foreign resident capital gains withholding, usually shortened to FRCGW. The name is misleading, because it catches Australian residents too. It was built to stop foreign sellers leaving the country with an unpaid tax bill, and the way it does that is by assuming every seller is foreign unless they prove otherwise.
Your certificate is the proof.
What Changed on 1 January 2025?
Two things, and together they widened the net enormously.
The rate went from 12.5% to 15%. And the $750,000 threshold disappeared. Before the change, only property selling for $750,000 or more sat inside the rules. Now every property does, whatever it sells for.
That matters in Western Sydney. A $620,000 unit in Mount Druitt sat well outside the old rules. Today it sits squarely inside them.
The rate applies to the market value of the property, which is normally just the sale price. The date that counts is the day the contract gets signed, not settlement day.
How Much Do You Actually Lose?
This is the part people get wrong, so it’s worth being blunt.
The 15% comes out of the sale price, not the capital gain. The ATO is not calculating what you owe. The buyer simply withholds 15% of the whole amount and sends it in.
Sell for $700,000 and $105,000 goes to the ATO. Sell for $1.2 million and $180,000 goes.
You get it back eventually. It sits as a credit against your tax bill, and you claim it when you lodge that year’s return. But “eventually” can mean waiting the better part of a year. Meanwhile the money you needed for the next deposit, the mortgage payout or the renovation is locked away.
Worse still, this happens even when you owe nothing. Sell your main residence with a full CGT exemption and no tax to pay, and you still lose 15% at settlement if the certificate isn’t there.
When Should You Apply?
Now, if you’re even thinking about selling.
The ATO says an application can take up to 28 days to process. That’s the published standard, and it can stretch when something needs checking. Once issued, the certificate stays valid for 12 months, so applying before you’ve signed anything costs you nothing. You can enter an expected contract date if you don’t have one yet.
Applying is free. The form is online. Most people who get caught out aren’t disorganised, they simply didn’t know the rule existed until their conveyancer mentioned it a fortnight before settlement.
Leave it that late and you’re relying on luck.
Three Traps That Catch Sellers
Each owner needs their own certificate. The ATO does not accept joint applications. A couple selling a house together must lodge two separate forms, one each. Miss one and withholding applies to that person’s share.
Your name has to match. The certificate issues in the legal name the ATO holds on file. If the name on the property title differs, perhaps after a marriage or a divorce, update your details with the ATO first. Getting this wrong means a rejected or delayed application at the worst possible moment.
Your conveyancer may not be able to lodge it. Conveyancers and real estate agents cannot complete the form on your behalf unless they’re also a legal practitioner or a registered tax agent. They can key in details you’ve already filled out on paper, but the responsibility stays yours. Plenty of sellers assume someone else is handling it. Often nobody is.
One more thing worth knowing: the application asks whether you’ve lodged tax returns for the last two years. Outstanding returns can slow the whole thing down. If you’re behind, sort that out before you list.
Who Needs One?
Anyone selling Australian property, including:
- Your family home, even where the main residence exemption wipes out any tax
- Investment properties and holiday homes
- Vacant land, commercial property and buildings
- Property held by a company or a trust, where the trustee applies using their own details
- Property inside a self managed super fund, where the fund trustee applies
Selling through a trust or an SMSF adds a layer, because the certificate must come out in the trustee’s name and the details need to line up with what the ATO already holds. Our SMSF services team handles this regularly.
Frequently Asked Questions
Do I need a clearance certificate to sell my own home?
Yes. The rules apply to every property sale in Australia, including a main residence. Even where the main residence exemption means you owe no capital gains tax, the buyer must withhold 15% of the sale price without a valid certificate at settlement.
How long does an ATO clearance certificate take?
Up to 28 days, according to the ATO. Applications where residency needs checking or where tax returns are outstanding can take longer. The certificate stays valid for 12 months, so applying as soon as you consider selling costs you nothing and removes the risk.
How much does a clearance certificate cost?
Nothing. The ATO does not charge for the application, and the online form is free to use. Some sellers ask an accountant or solicitor to lodge it, which may carry a professional fee, but the certificate itself has no cost.
What happens if I miss the deadline?
The buyer must withhold 15% of the sale price and pay it to the ATO at settlement. You claim it back as a credit when you lodge your tax return for that year, which usually means waiting months. The money is not lost, but it is tied up.
Can my partner and I apply together?
No. The ATO refuses joint applications. Every entity listed on the title lodges its own form, so a couple selling together needs two certificates. If only one comes through, withholding applies to the other person’s share of the sale.
Does 15% come out of my profit or the sale price?
The sale price. The ATO withholds against the full market value, not the capital gain, which is why the amount can be so large. A $900,000 sale means $135,000 withheld, regardless of whether you made a profit at all.
Talk to Us Before You List
SMG Group is a CPA Practice with offices at Rooty Hill, Wareemba and Liverpool. As registered tax agents, we can lodge your clearance certificate application for you, something your conveyancer may not be able to do.
We’ll also check the timing against your settlement date, sort out any outstanding returns that could hold things up, and work out what capital gains tax you’ll actually owe. Read more about how capital gains tax is calculated, or if you’re selling an investment, what you can still claim.
Selling soon? Contact our team or call 02 9832 2078. Twenty-eight days goes fast.
This article is general information only and does not replace personal tax advice. Rules described apply to contracts signed from 1 January 2025. Speak with our team about your situation before you sign anything.