Highlights

  • Since 1 January 2025, the foreign resident capital gains withholding rules have applied to property of any value.
  • A buyer must hold back 15% unless each seller provides a certificate.
  • The ATO updated its guidance on 9 October, and processing can take up to 28 days.
  • The withholding regime is aimed at foreign residents, but it works by making every seller prove they are not one.

Since 2025, every property sale has been caught by foreign resident withholding rules. Australian sellers without an ATO clearance certificate at settlement will have 15% held back, and the ATO says processing can take up to 28 days. Spring is peak selling season, and many Australian vendors still do not realise they need an ATO clearance certificate to avoid losing access to part of their sale price at settlement.

Why every seller is now in the net

Unless the buyer receives a valid clearance certificate at or before settlement, the buyer must withhold and pay the amount to the ATO. From 1 July 2017 to 31 December 2024, the rate was 12.5% and applied from $750,000. For contracts signed from 1 January 2025, the rate is 15% and there is no threshold at all. That means a modest unit or a regional house is now covered as well as a high-value home. This is enacted law, not a proposal. The ATO's guidance explains how sellers can comply.

What the clearance certificate is and how long it takes

Australian-resident sellers apply to the ATO for a clearance certificate. The ATO says processing can take up to 28 days, so it recommends applying at least 28 days before settlement. Once issued, a certificate is valid for 12 months, provided the seller's residency does not change. Because a certificate lasts that long, applying when a property is listed, rather than after contracts are exchanged, leaves more of a buffer. Each vendor on the title must apply separately. A couple selling a jointly owned home needs two certificates, not one.

Where applications get stuck

The ATO lists several situations that can push processing beyond 28 days: tax returns that have not been lodged names that do not match the title Name matching is a common problem. The ATO says the first and last names on the application must match the title, although middle names and titles such as Mr or Dr do not have to. A statutory declaration on its own is not accepted to explain a name change. The Real Estate Institute of Western Australia flagged name mismatches as the main cause of delays in March 2025, warning sellers not to risk having 15% of the sale price withheld. Sellers who changed their name after marriage or divorce, or whose title records an older version of their name, may face extra steps. Lodging any overdue tax returns before applying could also remove one of the delays the ATO lists.

What 15% means in dollars

Hypothetical example 1: A sole owner sells a house for $850,000 and does not provide a clearance certificate by settlement. The buyer must withhold 15%, or $127,500. The seller receives $722,500 at settlement, before loan repayments and other costs, and must claim back the $127,500 through a tax return. Under the rules for contracts signed between July 2017 and December 2024, the same sale would have attracted 12.5% withholding, or $106,250, because it was above the $750,000 threshold.