🚨 Selling Australian Property? New Withholding Rules Apply from 1 January 2025 - clearance certificate required

If you're planning to sell property in Australia — or buying from someone who is — there are important tax changes you need to know. From 1 January 2025, new rules tighten the Capital Gains Tax (CGT) withholding obligations for foreign residents. Here’s what you should know to avoid unexpected issues at settlement.

🏠 What’s Changed?

Starting 1 January 2025, all sellers of Australian property must provide a clearance certificate from the ATO proving they are not foreign residents.Otherwise, buyers are legally required to withhold 15% of the sale price and remit it to the ATO.

✅ This is a significant increase from the previous 12.5% withholding rate.

📌 Key Withholding Rules - clearance certificate

For contracts signed on or after 1 January 2025:

• 💰 15% of the purchase price must be withheld by the buyer if the seller is a foreign resident.

• 📝 Buyers must register as a withholder with the ATO before settlement.

• 💳 The withheld amount must be paid to the ATO before completion of the sale.

For contracts before 1 January 2025, the existing 12.5% withholding still applies, but only if the property value exceeds $750,000.

🧾 What If You’re a Foreign Resident Seller?

If you’re a foreign resident selling property, the withheld amount becomes a tax credit when lodging your Australian tax return.

But take note:Even if the property was your former main residence, foreign residents cannot claim the main residence CGT exemption.The entire capital gain is taxable in Australia.

🕵️‍♂️ What About the Seller’s Residency Status?

Buyers are not required to verify the seller’s residency independently.Instead, the seller must declare their residency status and provide an ATO clearance certificate if they’re not a foreign resident.If the certificate is not provided, the buyer must withhold 15%, and the solicitor or conveyancer will usually manage the process.

✅ Are There Any Exceptions?

Yes. The ATO may reduce or eliminate withholding if:

• The seller obtains a variation certificate.

• The seller is exempt from Australian tax (e.g. foreign charities).

• A CGT rollover applies (e.g. property transfer due to relationship breakdown).

• The property is jointly owned by an Australian resident and a foreign resident.

  
  

💼 Not Just Real Estate

The CGT withholding rules also apply to other Australian-connected assets, including:

• Significant interests in private companies

• Units in private unit trusts

  
  

⚖️ Final Thoughts

Understanding your obligations under the new CGT withholding regime is critical. Whether you are a buyer or a seller, a missed clearance certificate or incorrect withholding could lead to costly consequences.

💡 Need guidance on how these changes apply to your situation?

📞 Contact Baron Tax & Accounting today for tailored tax advice and seamless support throughout your property transaction.