What Homeowners and Brokers Need to Know
The Australian Taxation Office (ATO) has introduced major changes to the Foreign Resident Capital Gains Withholding (FRCGW) regime, affecting all Australian property owners selling their homes.
Previously, only foreign property owners and Australian residents selling properties valued at $750,000 or more had to provide a clearance certificate proving their tax residency status. However, as of January 1, 2025, every Australian property seller must now obtain and provide this certificate, regardless of property value.
Failure to present a clearance certificate at settlement will result in 15% of the sale price being withheld by the buyer and paid directly to the ATO—a sharp increase from the previous 12.5% withholding requirement.
This change applies to all property transactions, including residential, commercial, and vacant land sales.
Why Has the ATO Made This Change?
According to an ATO spokesperson, these updates aim to strengthen tax collection from non-residents selling Australian property. However, the broad expansion of the rule to include all Australian residents has raised concerns among tax professionals.
“This is a massive change,” said Belinda Raso, Director and Registered Tax Agent at Tax Invest Accounting. “Most people are already stressed when selling or buying a home. Brokers need to ensure their clients are aware of this requirement to prevent unnecessary delays.”
What This Means for Property Sellers
To comply with the new rules, property sellers must apply for a clearance certificate through the ATO.
- The certificate is free and valid for 12 months from the date of issuance.
- Processing typically takes a few business days, but delays could extend up to 28 business days in certain cases.
- If a seller fails to present the certificate before settlement, they will lose 15% of their property sale proceeds upfront—money they will only recover through their next tax return.
For instance, on an $800,000 home (the median price in Australia), the tax deduction would amount to $120,000. Sellers who fail to provide a clearance certificate would need to wait until their next tax return to claim this refund, potentially facing an 11-month delay in accessing their withheld funds.
Key Steps for Homeowners and Brokers
Homeowners Selling Property
- Apply for the clearance certificate as soon as you decide to sell.
- Provide your contact details, tax file number, date of birth, and residency status when applying.
- Ensure all owners listed on the title apply separately—each must have their own clearance certificate.
Mortgage Brokers and Real Estate Professionals
- Inform all selling clients about the new requirement.
- Encourage clients to apply early to avoid settlement delays.
- Provide paper copies of the clearance certificate application but do not complete the form on their behalf.
How Vantage Loans Can Assist You
Navigating ATO regulations while selling your property can be overwhelming. At Vantage Loans, we help homeowners, investors, and brokers stay ahead of tax and lending changes, ensuring a smooth property transaction.
If you’re selling property and want to understand how this impacts your finances, or if you’re looking for expert mortgage advice, get in touch with our team today.
Contact us today at 1800 595 500, email support@vantagefinancial.com.au, or visit vantagefinancial.com.au
