Australian residents and clearance certificates

Clearance certificates for Australian residents

Foreign resident capital gains withholding (FRCGW) must be withheld on all real property (property) sales unless the vendor is an Australian resident for tax purposes.

All Australian residents (for tax purposes) selling or disposing of Australian real property (property) must have a clearance certificate and give it to the purchaser at, or before settlement.

Without a clearance certificate, the purchaser must withhold up to 15% of the sale proceeds (or market value if not sold at arm's length) for foreign resident capital gains withholding (FRCGW) purposes.

Note: There are specific circumstances that are covered by a legislative instrument that don’t require a clearance certificate.

Australian residency

Depending on circumstances, residency can change. We will confirm your residency status for FRCGW purposes when you apply for a clearance certificate.

Individuals

The residency test for individuals for taxation purposes is different to that for social security and immigration purposes.

Generally, an Australian resident for tax purposes is an individual who:

• has always lived in Australia or has come to Australia and lives here permanently
• has been in Australia continuously for 6 months or more, and for most of that time, worked in the one job and lives at the same place
• has been in Australia for more than 6 months of the year, unless their usual home is overseas and they don't intend to live in Australia
• goes overseas temporarily and doesn't set up a permanent home in another country
• is an overseas student in Australia to study and is enrolled in a course that is more than 6 months.

You can work out your tax residency or work out your residency status for tax purposes.

Non-individuals

Different residency tests apply to non-individual entities such as companies, corporate limited partnerships and trusts.

Non-individuals can refer to Working out your residency.

Rate of withholding from a property sale

The following FRCGW rates apply to the market value of property contracts signed:

• On and after 1 January 2025, a rate of 15% applies to the value of all property.
• From 1 July 2017 to 31 December 2024, a rate of 12.5% applies to property valued at $750,000 or more.
• From 1 July 2016 to 30 June 2017, a rate of 10% applies to real property valued at $2,000,000 and above.

 

Types of property

Taxable Australian real property requiring a clearance certificate includes:

• your home
• vacant land, buildings, residential and commercial property
• mining, quarrying or prospecting rights where the material is situated in Australia
• indirect Australian real property interests (IARPI), where the holder has a right to occupy land or buildings on land.

Applying for a clearance certificate

In this section:

• Clearance certificates
• Who can apply
• Processing times
• If you don’t have a clearance certificate
• Names on the clearance certificate

Clearance certificates

You should lodge your application as soon as you are considering selling, as it can take up to 28 days to process and issue a certificate.

The vendor (or seller) is the entity that owns the legal title to the property.

An ATO-issued clearance certificate confirms the vendor's Australian residency for foreign capital gains withholding.

When selling Australian real property:

• you don't have to wait to sign a contract - apply for a clearance certificate as soon as you are thinking of selling, they are free
• each vendor must give their clearance certificate to the purchaser before the settlement date
• applications for clearance certificates can take up to 28 days to process and issue
• if there's no clearance certificate provided by the vendor by the settlement date, the purchaser must withhold an amount of FRCGW and pay it to us
• clearance certificates are valid for 12 months from their date of issue (as long as the vendor's residency status doesn't change during that time)
• if you decide not to sell, but have a clearance certificate, there's no requirement to use it
• applications for clearance certificates are free.

If a vendor is a non-individual entity, for example a super fund, partnership, trust or company, see Clearance certificates in certain circumstances.

In certain circumstances, the property can be looked after on behalf of another entity, for example, a trustee for a deceased estate.

Note: When vendors don't have a valid clearance certificate from us at or before settlement, the purchaser must withhold a FRCGW amount from the sale.

Apply for a clearance certificate

If someone else is completing your clearance certificate application, see Who can apply.

For more information on how to complete the form, see Capital gains withholding clearance certificate application online form instructions – for Australian residents.

A paper form and instructions are also available. See Capital gains withholding clearance certificate application paper form instructions for more information.

The contract is longer than 12 months

There may be instances where the settlement date is after the expiry date on the vendor's clearance certificate. For example, where an off-the-plan apartment is acquired and the contract period is greater than 12 months.

The purchaser may rely on the clearance certificate as long as:

• the date it's made available to the purchaser is within the period stated on the certificate, and
• the certificate period covers some of the time the transaction is in effect; the transaction is in effect from the contract date through to the settlement date.

In relation to trusts, we accept the purchaser has fulfilled their obligation if the vendor can show that the entity on the clearance certificate is the trustee of the trust (for example, as evidenced by a copy of the trust deed).

Who can apply

Those who can apply for a clearance certificate include:

• vendors
• Australian legal practitioners and registered tax agents representing the vendor on their behalf.

Conveyancers who are not legal practitioners

Conveyancers can't apply for a clearance certificate on behalf of the vendor, but can assist them to apply by:

• giving the vendor a paper clearance certificate application (PDF, 290KB)This link will download a file to complete and sign, then using the information on the paper application to enter the data online (don't send in the paper application as this information has already been entered online)
• entering application data online with the client and printing the application for the client to sign before submitting it.

The Tax Practitioners Board (TPB) advises that conveyancers should have a declaration to make it clear they’re not a registered tax agent or Australian legal practitioner and can’t provide tax advice.

Remember to give your client a hard copy for their records. If you retain a copy of signed applications, keep them secure as they contain sensitive information.

For more information, see Conveyancing and the TASAExternal Link on the Tax Practitioners Board website.

Processing times

Applications must be lodged at least 28 days before settlement to ensure you have your clearance certificate in time.

Each application is processed separately, so members of a couple or group may receive them at different times.

Processing may take longer if:

• the vendor hasn't lodged income tax returns recently
• there's a change in residency status
• the names on our records don't match the names on the Certificate of Title - see Name on the clearance certificate
• the property is owned by complex entity structures and determining the residency takes longer.

If you lodge your application close to the settlement date, we can't guarantee it will be processed by that date.

If you don’t have a clearance certificate

If an Australian resident vendor doesn't provide a valid clearance certificate at or before settlement, the purchaser must withhold a FRCGW amount, even if the Australian resident vendor:

• is entitled to a clearance certificate, but didn't get one
• didn't provide their certificate to the purchaser at or before settlement.

Name on the clearance certificate

The entity that is named on the certificate of title is the entity legally required to have a clearance certificate.

There are different requirements based on the type of 'entity'.

Individuals

Trusts and superfunds

Consolidated groups and multiple entry groups

• Individuals
• Trusts and super funds
• Consolidated groups and multiple entry groups

Individuals

Clearance certificates are issued in the legal name on our system.

• The first and last names on the clearance certificate must match the property's certificate of title for it to be accepted by the purchaser.
• Middle names don’t need to be supplied or matched.
• A title (honorific) match isn't required. For example, it doesn't matter if Miss Susie Tan is titled 'Ms', 'Mrs', or 'Dr' Tan.

Name mismatch

If the certificate of title:

• shows your legal name, but doesn't match ATO systems, you need to update your legal name with us before you apply; in some circumstances this may not be required – see Proof of name change
• doesn't show your legal name, but your name on ATO systems is correct, you need to:
  • update your certificate of title with your correct legal name, or
  • check with your state or territory governing body to see what documentation you can provide to the purchaser to ensure they are satisfied you are the registered owner.

Proof of name change

Legal documentation is required to support a name change. The ATO doesn't accept the use of statutory declarations unless they are supported with other legal documents (for example, a marriage certificate or a change of name certificate issued from an Australian state or territory registry).

If the proof of name change is from an overseas source, you must update your name with the ATO by post.

Trusts and super funds

The entity that has legal title to the property applies for the clearance certificate. In most cases this is the trustee who applies in their own capacity as either a company or an individual.

The name on the certificate of title and clearance certificate must match.

The trustee must:

• ensure the associates' details in the Australian business register are updated and correct
• apply for the clearance certificate
• use one of either
  • the trustee’s tax file number (TFN)
  • their Australian business number (ABN) as the identifier if applicable.

The clearance certificate is issued in the name that appears on our systems.

We accept the purchaser has fulfilled their obligation if the vendor can show that the entity on the clearance certificate is the trustee of the trust (for example, as evidenced by a copy of the trust deed).

Note that a change of trustee/trustees doesn't constitute a change to beneficial ownership and the assets still belong to the beneficiaries of the trust. No clearance certificate is required in this situation as no CGT event has happened.

Trustee doesn't have a TFN

If the:

• corporate trustee is a company that doesn't have a TFN, attach the details of the trust and the company's Australian company number (ACN) to the application
• trustee is an individual that doesn’t have a TFN, attach the details of the trust’s name with the application; for example, a copy of the trust deed.

This may be needed where the trust is registered in ATO systems as 'The trustee for ABC Trust' where the property title contains 'XYZ as the trustee for ABC Trust', or the clearance certificate only lists the trustee's name.

For help to complete the clearance certificate application, use the online instructions.

Consolidated groups and multiple entry groups

A member of a consolidated group or multiple entry groups that purchases an asset to which holding applies from another member of the group is still required to comply with the withholding obligation.

We issue a clearance certificate to the head company or provisional head company of the group, which includes the members of the group as an attachment.

We rely on the group membership information as recorded on our systems. If group membership has changed, it's up to the head company to notify us of these changes before making a clearance certificate application.

Alternatively, subsidiary entities can, in their own right, apply for a clearance certificate and have one issued in their own name.

Clearance certificates in certain circumstances

In certain circumstances, there are different requirements for clearance certificates.

In this section:

• Relationship breakdown
• Transferring property
• Mortgagee sales
• Deceased estates
• Income tax exempt entities

Relationship breakdown

There are circumstances where a clearance certificate (or an FRCGW variation) isn't required when a relationship breaks down. Legislative instrument PAYG Withholding variation for foreign resident capital gains withholding payments – marriage or relationship breakdownsExternal Link varies the withholding amount to nil where:

• the transfer of property happens under the Family Law Act 1975 or under a relevant state, territory or foreign law
• the transfer is from one former spouse to another
• the transferee has documentation in accordance with subsection 126-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) by the time of the transfer.

For more information, see When the relationship breakdown rollover applies.

Transferring the certificate of title according to a court order will provide certainty of legal ownership and avoid potential withholding if any of the title holders are uncontactable in the event of a future property sale.

When a property is transferred or sold to a third party under a marriage or relationship breakdown settlement (not a court order or equivalent agreement under the Family Law Act 1975), all vendors on the certificate of title should seek a:

• clearance certificate if a resident
• variation if a foreign resident.

 

 

Transferring property

Transferring property from one entity to another entity is a capital gains event. This includes family transfers.

This means the transferor needs either a clearance certificate or a variation to avoid withholding applying.

The withholding amount needs to be based on the market value of the property at the time of the transfer. The independent market valuation should be done by a qualified valuations expert for Australian tax purposes.

Mortgagee sales

When you borrow funds (mortgagor) from a mortgagee (a creditor, such as a bank) and aren't able to repay the loan, the mortgagee can force the sale of the property.

There are 3 situations where this commonly applies:

1. The mortgagor keeps the title to the sale while the mortgagee orders the property be sold but hasn't repossessed the title to the property.
   • The mortgagor must get a clearance certificate. Without a clearance certificate, FRCGW would apply to the sale, unless the mortgagee applies and receives a variation notice.
   • The mortgagor remains the legal owner of the property. They must apply for a clearance certificate and ensure it is provided to the final purchaser. If the mortgagor doesn't cooperate with the mortgagee, the mortgagee (as a creditor) can apply for a variation notice to have the withholding reduced to the amount owed (if the sale proceeds don't cover the residual mortgage).
2. The mortgagee takes possession of the property and sells it, but there's no transfer of title from mortgagor to mortgagee.
   • The mortgagee can apply for a variation notice to have the withholding reduced (if the sale proceeds don't cover the residual mortgage).
3. Foreclosure, when the mortgagee repossesses and takes the title to the property. FRCGW may apply when the transfer of title is made from the mortgagor to the mortgagee (generally, a sale of the property at market value).
   • The transfer of title from the mortgagee to the final purchaser. If the mortgagor doesn't cooperate with the mortgagee, the mortgagee (as a creditor) can apply for a variation notice to have the withholding reduced (if the sale proceeds don't cover the residual mortgage).

However, if the mortgagee is an Australian Deposit-taking Institution (such as an Australian bank), in some circumstances, the rate of withholding is varied to 0%. For more detail, see PAYG Withholding variation for foreign resident capital gains withholding payments – no residue after a mortgagee exercises a power of sale 2020External Link.

Deceased estates

Executor of the will is an Australian resident

When the executor or trustee (legal representative) of a deceased estate is selling or disposing of a property, there are some circumstances when a clearance certificate or withholding isn't required. Legislative instrument PAYG Withholding variation for foreign resident capital gains withholding payments – deceased estates and legal personal representativesExternal Link varies the withholding amount to nil in the following circumstances:

• a beneficiary of the will acquires the property (regardless of their residency)
• a surviving joint tenant acquires the property
• the property is transferred to the legal representative.

The operation of the Instrument extends to circumstances where assets pass to beneficiaries of a testamentary trust.

When clearance certificates are required

If the property is sold or transferred to anyone not listed in the Legislative instrumentExternal Link, the legal representative must have a clearance certificate (on behalf of the deceased).

Without one, the purchaser or whoever acquires the property is required to withhold 15% of the sale price and remit it to us.

When completing a clearance certificate application, the legal representative must:

• enter the 'entity type' as trustee in the Vendor details section – this ensures the clearance certificate will show 'as trustee for'
• include the deceased vendor's name according to the name on the property title; there is no need to have ‘as executor for’ on the application.

 

Executor of a will is a foreign resident

If the executor of the will is a foreign resident, FRCGW is applicable on the sale of the property.

The foreign resident's legal personal representative can apply for a variation of the withholding amount if the withholding amount is more than the Australian tax liability on the sale of the asset.

See Foreign residents and variations for more information.

Income tax exempt entities

A clearance certificate isn't required when a vendor provides evidence they're an income tax exempt entity, provided they have both of the following:

• a private ruling issued by us confirming its income tax exemption valid for the income year of the transaction
• documents showing it's a registered charity under item 1.1 of section 50-5 of the ITAA 1997.

For more information, see PAYG Withholding variation for foreign resident capital gains withholding payments – income tax exempt entitiesExternal Link.

If you are a non-charitable not-for-profit (NFP) with an active Australian business number (ABN) and are required to lodge a NFP self-review return each year to confirm your eligibility to self-assess as income tax exempt, you will still need to apply for a clearance certificate so that the FRCGW is not withheld.

Excluded transactions

The law excludes certain transactions from the obligation to withhold. The vendor will need to determine their income tax or capital gains tax obligations when completing their income tax return.

Transactions on an approved stock exchange

The nature of these transactions makes it impossible for a purchaser to determine the identity and residency status of the vendor.

Transactions on a crossing system

A crossing system (also known as a ‘dark pool’) is a system that enables trading off-market, although the trades are typically reported to the market immediately after they take place.

As with transactions that occur on an approved stock exchange, it may not be possible for a purchaser to determine the identity and residency status of the vendor.

Securities lending arrangements

A ‘securities lending arrangement’ is an arrangement where a holder of securities agrees to provide its securities to a borrower for a specified period of time, with an associated agreement by the borrower to return equivalent securities at the end of the agreed period. These arrangements are typically entered into for purposes such as short-selling or hedging.

External administration and bankruptcy

The vendor is in external administration or transactions arising from the administration of a bankrupt estate, a composition or scheme of arrangement, a debt agreement, a personal insolvency agreement, or same or similar circumstances under a foreign law.

Receiving your clearance certificate

Clearance certificates are sent by email (if it's included in the application).

To get their clearance certificate online, individual vendors can also view their clearance certificate by doing this:

• log in to myGov, go to ATO online services
• from the My profile menu, go to Communication
• go to History.

If there's no email address, the clearance certificate is posted to the vendor and their contact using the address in the application.

If you choose to communicate with us via email, be aware the internet isn't a secure environment. We can't guarantee the privacy and security of personal information.

Invalid or fraudulent clearance certificates

We can withdraw a clearance certificate at any time if we learn a vendor is a foreign resident (also known as a non-resident).

If a purchaser, in good faith, hasn't withheld FRCGW from the purchase price, they won't be subject to a penalty for failure to withhold.

We will hold the vendor liable for making a false and misleading statement and may prosecute them.

Lodging a tax return to claim a credit

If you don't provide a clearance certificate to the purchaser at or before settlement and an amount of FRCGW was withheld, you must lodge a tax return to get that amount credited to you – even if your income was below the threshold to lodge.

Note: The following instruction also applies to beneficiaries of deceased estates when an amount has been withheld.

1. You need a copy of the FRCGW payment confirmation from the purchaser as proof of the amount withheld.
2. When completing your tax return:
   • declare your assessable income, including any capital gain or loss from the sale or disposal of the property, if applicable
   • claim a Credit for foreign resident capital gains withholding amounts taken from the sale proceeds.
3. The FRCGW amount will be refunded in full if:
   • there are no tax debts
   • there’s no CGT payable on the sale of the property.

A credit for the amount withheld for FRCGW applies to the income year the contract was signed. It may be months later when the vendor can lodge their tax return to declare their capital gain and claim any credit for the amount withheld. This is generally because tax returns can't be lodged before the end of the relevant income year. Any amount due to the vendor will be refunded to them after the tax return is assessed.

If the contract is signed in one income year but the purchaser pays the FRCGW to us in the next income year, the capital gain and claim for the credit for FRCGW amounts should be included in the income year the sale contract was signed.

Deceased estates and lodging a tax return to claim a credit

Legal representative

When an amount has been withheld on a deceased estate, the legal representative may lodge a Trust return on behalf of the estate.

Claim the credit at the Capital gains section under Credit for foreign resident capital gains withholding amounts.

1. The legal representative needs a copy of the FRCGW payment confirmation from the purchaser as proof of the amount withheld.
2. When completing your tax return:
   • declare your assessable income, including any capital gain or loss from the sale or disposal of the property, if applicable
   • in the Capital gains section, claim a Credit for foreign resident capital gains withholding amounts.
3. The FRCGW amount will be refunded in full to the deceased estate if
   • there are no tax debts for the estate
   • there’s no CGT payable on the sale of the property.