What is a Clearance Certificate? Why do you need one when selling property?

If you're selling property in Australia, you may have heard about the Clearance Certificate and wondered why it’s now a crucial part of the selling process. This certificate is issued by the Australian Taxation Office (ATO) and serves as confirmation that the seller is an Australian tax resident and not subject to Capital Gains Withholding (CGT withholding tax) on the property sale.

 

Why you need Clearance Certificate. 

The Australian government introduced Capital Gains Withholding Tax to ensure that foreign residents meet their tax obligations when selling Australian property. However, Australian residents are not subject to this tax. The Clearance Certificate is the official document that proves you are an Australian resident for tax purposes and ensures that no tax is withheld from the sale proceeds.

Without a valid Clearance Certificate, the buyer of the property is legally required to withhold 15% of the sale price and remit it to the ATO. This can cause unnecessary delays and reduce the amount you receive from the sale. To avoid this, it's essential to obtain your certificate before settlement.

 

Applying for a Clearance Certificate 

Who needs to apply? 

A Clearance Certificate is required for individuals and entities selling any taxable Australian real property. The rate that has to be withheld if you don’t have a clearance certificate is 15%. This applies to:

• Individuals
• Companies
• Trusts
• Superannuation funds

If you're selling through Ascent Property Co, we highly recommend applying for your certificate well in advance to ensure a smooth transaction.

 

How to apply.  

Applying for a Clearance Certificate is straightforward and free. Here’s how to do it in three easy steps.

1. Prepare your details. Have your Tax File Number (TFN) and Australian Business Number (ABN) (if applicable) ready.
2. Complete and submit the online form. The ATO provides an easy-to-use online application form. Access it here: Apply for Clearance Certificate. Once submitted, the ATO typically processes applications within 28 days, but it may be even faster.
3. Provide the certificate to the buyer. Once received, give the certificate to the buyer (or your Agent on your behalf) before settlement to avoid any tax withholding.

 

Let Ascent Accountants & Ascent Property Co assist you. 

At Ascent Accountants, we help property sellers navigate tax compliance, including applying for Clearance Certificates. Contact us to get started.

If you're selling through Ascent Property Co, or would like to, the friendly team will guide you through the necessary legal paperwork (everything — not just Clearance Certificates) ensuring a seamless and hassle-free sale experience. Reach out to learn more.