New ATO Property Sale Rules in 2025: What Buyers and Sellers Must Know

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In January 2025 The Australian Taxation Office (ATO) introduced significant changes to property sales regulations that will impact all Australian residents buying and selling property. These new rules could affect your settlement process, so it’s key to ensure you understand your obligations.

What’s Changing?

Previously, only property sales above $750,000 required an ATO clearance certificate. However, as of 1 January 2025, all property sellers must provide a clearance certificate at or before settlement—regardless of the sale price. If they fail to do so, 15% of the sale price will be withheld and paid to the ATO.

Why? 

This change is all due to an update to the Foreign Resident Capital Gains Withholding (FRCGW) legislation. This legislation aims to ensure foreign residents pay their capital gains tax before they move sale proceeds offshore. Even thought, Australian residents are exempt, they must prove their residency status by providing a clearance certificate.

What is a Clearance Certificate?

A clearance certificate is an official document issued by the ATO confirming that the seller is an Australian resident for tax purposes. Without it, the buyer is legally required to withhold 15% of the purchase price and remit it to the ATO.

Why does it matter?

Failing to obtain a clearance certificate can have massive financial implications for sellers. The withheld funds can only be claimed back when the seller lodges their 2025 tax return – less than ideal for your cash flow.

How to Obtain a Clearance Certificate

Sellers can apply for a clearance certificate online through the ATO website. The application is free, and certificates are usually issued within a few days. However, sometimes it can take up to 28 days so get in there early! Your solicitor or conveyancer will be able to assist you with this process.

Some Key Takeaways for Sellers

✔ Apply for your clearance certificate as soon as you decide to sell.

✔ Your certificate is valid for 12 months from the date of issue.

✔ Each seller listed on the property title must obtain their own certificate.

✔ Ensure your name on the property title matches your ATO record.

Some Key Takeaways for Buyers

✔ You must receive a valid clearance certificate from the seller before or at settlement.

✔ If a certificate is not provided, you’ll need to withhold 15% of the purchase price and pay this to the ATO.

✔ Buyers are legally obligated to comply with this rule.

 

📌 Contracts Signed Before 1 January 2025 – Old rules apply, clearance certificate is not required (unless over $750,000).

📌 Contracts Signed On or After 1 January 2025 – New rules apply, clearance certificate is mandatory for all sales.

How to Apply

Applying for a clearance certificate is straightforward:

  • Visit the ATO website and submit an online application.
  • You’ll need to provide your contact details, tax file number, date of birth, and residency status.
  • The certificate is valid for 12 months and is typically processed within a few days.
  • Keep in mind it can take up to 28 days in some cases, so apply early!

If you’re selling a property in 2025, think about applying for your ATO clearance certificate as soon as you list your home. This will ensure a smooth and hassle-free settlement.