Navigating ATO Clearance Certificates: Essential for Sellers & Buyers

Selling a property over $750,000 in Australia? Don’t overlook the ATO Clearance Certificate! Without it, the buyer must withhold 12.5% of the sale price for the ATO. That’s a significant amount, and avoiding unnecessary tax withholding is crucial. Here’s everything you need to know:

1️⃣ What is an ATO Clearance Certificate?

An ATO Clearance Certificate confirms that a seller is an Australian resident for tax purposes, exempting them from the 12.5% withholding tax. It’s valid for 12 months and can be reused for multiple property sales within that period.

2️⃣ Who Needs an ATO Clearance Certificate?

Sellers of properties worth $750,000 or more must obtain one.
If the seller fails to provide the certificate at settlement, the buyer is legally required to withhold 12.5% of the purchase price and remit it to the ATO — even if the seller is an Australian resident.

3️⃣ Buyer’s Responsibility

If a seller does not supply the clearance certificate, the buyer must withhold 12.5% of the purchase price.
Failure to withhold? The ATO may hold the buyer personally liable for the unpaid tax amount.
Buyers should always verify the seller’s clearance certificate before settlement to avoid complications.

4️⃣ What About Foreign Sellers?

Foreign residents cannot obtain an ATO Clearance Certificate.
However, they may apply to the ATO to adjust the withholding rate based on their circumstances.
Timing is crucial – foreign sellers should act fast to ensure smooth transactions.

Why It Matters

Obtaining an ATO Clearance Certificate is critical to avoid delays, withholding tax, and financial uncertainty. Apply early, stay informed, and seek professional assistance if needed.

At Rothschild Group, our experienced property lawyers and settlement agents have successfully guided numerous clients through this process.

Need assistance? Contact us today for expert advice and a hassle-free property transaction!

And remember: No clearance certificate = 12.5% withheld. The ATO won’t hesitate to claim it!