What is a clearance certificate and why you need one when selling property

18/05/2026/linkcreative

If you are selling property in Australia, you may be asked for an ATO clearance certificate before settlement.

This requirement often surprises Australian sellers, especially when the sale price is $750,000 or more. Without a valid certificate, the buyer is legally required to withhold part of the sale price and pay it to the ATO.

Understanding how clearance certificates work can help you avoid unnecessary withholding, delays and cash flow issues.

What is an ATO clearance certificate?

An ATO clearance certificate is an official document issued by the Australian Taxation Office (ATO).

It confirms that the seller of Australian property is not a foreign resident for tax purposes.

When a valid clearance certificate is provided to the buyer:

  • No tax is withheld at settlement
  • The full sale proceeds are paid to the seller
  • There is no need to claim a refund later

Most Australian residents are eligible, but the certificate must be applied for and issued in advance.

Why clearance certificates exist

Clearance certificates form part of Australia’s foreign resident capital gains withholding (FRCGW) regime.

Under these rules:

  • All sellers are treated as foreign residents by default
  • Buyers must withhold 12.5% of the purchase price unless a clearance certificate is provided
  • The rule applies to residential, commercial and vacant land

The system ensures the ATO can collect capital gains tax from foreign sellers, even if they leave Australia after selling property.

When do you need a clearance certificate?

You generally need a clearance certificate if:

  • You are selling Australian real property, and
  • The market value of the property is $750,000 or more, and
  • The seller is an individual, trust, company or SMSF

This includes:

  • Homeowners
  • Investment property owners
  • Trusts and superannuation funds
  • Companies selling property assets

Being an Australian citizen does not remove the requirement.

What happens if you do not provide one?

If a valid clearance certificate is not provided by settlement:

  • The buyer must withhold 12.5% of the sale price
  • The withheld amount is paid directly to the ATO
  • The seller must lodge a tax return to claim any refund

For example, on an $850,000 sale, $106,250 may be withheld, even if the seller has no capital gains tax liability, and refunds can take months to process.

How long does a clearance certificate last?

Once issued:

  • A clearance certificate is usually valid for 12 months
  • It can be used for multiple property sales during that period
  • It must be valid at the time of settlement

If the selling entity’s details change, a new certificate may be required.

Common misconceptions

Many sellers assume:

  • “This only applies to foreign residents”
  • “My conveyancer will automatically handle it”
  • “It’s only required after contracts are exchanged”

These assumptions often lead to last-minute issues or unexpected withholding.

The responsibility sits with both the seller and the buyer to ensure the correct documentation is provided.

When should you apply?

Ideally, you should apply for a clearance certificate:

  • As soon as the property is listed for sale, or
  • Immediately after signing a contract

While processing is often quick, delays can occur if details are incorrect or incomplete.

Leaving it until days before settlement creates unnecessary risk.

How CGT CLearance can help

Applying for a clearance certificate is straightforward, but errors can result in:

  • Settlement delays
  • Buyer withholding
  • Refunds that take months to recover

CGT Clearance service ensures:

  • The correct entity applies
  • Details match ATO records
  • Buyers receive compliant documentation

The CGT Clearance team can help you sell property with confidence and avoid unnecessary withholding. Click here to obtain your certificate.