A clearance certificate provides certainty to purchasers regarding their withholding obligations
It confirms the withholding tax is not applicable to the transaction.
The purchaser must withhold 12.5% of the purchase price in transactions involving taxable Australian real property, or an indirect Australian real property interest that provides company title interests, with a market value of $750,000 or more, unless the vendor shows the purchaser a clearance certificate from us.
The ATO processes applications in order of date of receipt. To avoid possible delays in your settlement, apply online for a clearance certificate at least 28 days before you require it.
It is the vendor’s responsibility to obtain the clearance certificate and provide it to the purchaser at or before settlement. To avoid unanticipated delays, and to ensure the certificate is valid at the time it is given to the purchaser, vendors seeking a clearance certificate should apply through the online form as early as practical in the sale process.
Without being presented with a valid clearance certificate, the purchaser will be required to remit 12.5% of the purchase price to us if no other exclusions apply.
How to apply
The Australian resident entity (or their representative) will need to complete an online Clearance certificate application for Australian residents.
Where there are multiple Australian resident vendors disposing of the asset, each vendor should apply for a separate clearance certificate in their name only.
Australian residents not required to lodge tax returns, such as aged pensioners, are still required to obtain a clearance certificate.
If you are a foreign resident there is no point in you lodging an application. However if you may be entitled to a variation to the withholding rate, then you can lodge a variation request.
Where a valid clearance certificate is provided, the purchaser is not required to withhold an amount from the purchase price for the vendor listed in the clearance certificate.
If an Australian tax resident vendor has had withholding taken from their sale proceeds, for example because they didn’t provide the purchaser with a clearance certificate, they will be able to claim a credit for that amount when they lodge their tax return. This credit may be refunded if they don’t have to pay capital gains tax on the sale of the property (for example, because it was their main residence).
Only an Australian resident entity can obtain a clearance certificate. Solicitors, tax agents or other representatives of the vendor can apply on the vendor’s behalf.
Conveyancers, real estate agents and others charging a fee for services (but who are not legal practitioners or registered tax agents) should obtain a completed paper PDF version of the clearance certificate form from the vendor. They can then use the details on the paper form to complete the online form, ensuring faster processing, as part of the settlement process.