Australians planning to sell property in 2025 should take note of a significant tax rule change that could affect their finances if not managed carefully. From January 1, 2025, all property sellers in Australia must obtain a clearance certificate from the Australian Taxation Office (ATO) to confirm their residency for tax purposes. Without this certificate, buyers are required to withhold 15% of the sale price and remit it directly to the ATO.
What Has Changed?
Removal of the $750,000 Threshold
Previously, the foreign resident capital gains withholding (FRCGW) rules only applied to properties valued at $750,000 or more. This threshold has now been removed, meaning all property sales, regardless of value, are subject to the new rules.
Increased Withholding Rate
The withholding rate has been raised from 12.5% to 15%, making it even more critical for sellers to have their clearance certificate in place to avoid delays in accessing their funds.
The Financial Impact
For context, with the average Australian home valued at $814,837, the 15% withholding would amount to approximately $122,225. Sellers without a clearance certificate would need to wait until they file their next tax return to claim this money back.
How to Obtain a Clearance Certificate
The process for getting a clearance certificate is straightforward and can be done through the ATO website. Key details include:
- Cost: Free.
- Validity: Certificates are valid for 12 months, so you can apply well in advance.
- Processing Time: Most applications are processed within a few days, but in some cases, it may take up to 28 days.
Expert Advice
Belinda Raso, director of Tax Invest Accounting, encourages property sellers to get organised early.
“This is free to organise; it just needs to be in the vendor’s name, and it’s valid for 12 months,” she explained. “Normally, this is handled by your conveyancer or solicitor, but why not get organised now?”
Additionally, having a certificate in hand does not obligate you to sell your property if you later change your mind.
Key Dates and Applicability
The updated rules apply to contracts signed on or after January 1, 2025. Sellers entering into agreements before this date will not be affected by the new requirements.
Why This Change?
The foreign resident capital gains withholding rules are designed to ensure that non-residents fulfill their tax obligations when selling property in Australia.
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