If you are selling property in Australia, an ATO clearance certificate is now an important part of the settlement process.
For contracts entered into from 1 January 2025, Australian resident sellers generally need to provide a valid clearance certificate before settlement to avoid 15% of the sale price being withheld and paid to the ATO.
The previous property value threshold has also been removed, meaning the requirement can apply regardless of the sale price.
The ATO recommends applying early, as some applications can take up to 28 days to process.
A clearance certificate is generally valid for 12 months, so sellers do not need to wait until a property has sold before applying.
Where a property has more than one registered owner, each seller will generally need their own certificate.
If a valid clearance certificate is not provided, the purchaser may be required to withhold 15% of the purchase price.
For example:
$800,000 sale price = potential withholding of $120,000
The withholding may later be claimed as a tax credit where applicable, but it can create a significant cash-flow issue at settlement.
Thinking of selling? Apply early.
Classic Conveyancing encourages sellers to deal with their ATO clearance certificate as soon as possible to help avoid unnecessary settlement complications.
