Clearance certificate a must for property sellers from 2025

Starting January 1, 2025, all property sellers in Australia, including foreign investors, must obtain an Australian Tax Office (ATO) clearance certificate. 

Clearance Certificate: A Must-Have for Property Sales

Your Clearance certificate is to show the Australian government if you are an Australian resident or non-resident. As a non-resident, you will have to pay 15% withholding tax when you sell, while this will not apply for residents. 

Key points about clearance certificates:

• Mandatory for all property sales, regardless of residency status
• Must be obtained before selling your property
• Helps prevent automatic withholding of 15% of the sale price
  

  Clearance certificate is mandatory for property sellers in Australia

Variation Notices: A Potential Tax Relief

While the new withholding tax rate may seem daunting, variation notices offer a ray of hope for foreign property investors. These notices allow you to request a reduced withholding rate, potentially freeing up more of your sale proceeds.

Eligibility for variation notices:

• No capital gain on the transaction
• Reduced income tax liability
• Existing mortgages on the property

To apply for a variation notice:

• Lodge application as soon as the sales contract is signed
• Expect processing to take up to 28 days (some instances can take longer)
• Provide approved variations to the purchaser before settlement

  For more information, read: https://www.ato.gov.au/forms-and-instructions/foreign-resident-capital-gains-withholding-rate-variation-application-online

Tax Changes Impacting Foreign Property Investors

The tax landscape for foreign property investors in Australia is evolving rapidly:

1. Withholding tax increase:
   • Now 15% for all property sales (up from 12.5%)
   • Applies to all transactions, regardless of property value
2. Land tax changes:
   • Victoria: 4% absentee owner surcharge and 1% Vacant Residential Land Tax
   • New South Wales: 5% land tax surcharge for foreign owners
   • Queensland: Significant annual payments for absentee owners
3. Reduced land tax thresholds:
   • Victoria’s threshold dropped from A$350,000 to A$50,000
   • More properties now subject to land tax

Read more about these updates in our article published in The Star Malaysia:
Clearance certificates and Variation notices for overseas property sellers

Taking Action: Protect Your Investment

We suggest you take action as soon as possible with the following: 

1. Obtain a Tax File Number (TFN) from the Australian Consulate
2. Submit all outstanding tax returns
3. Consider applying for a variation notice when selling
4. Seek professional advice to understand your obligations

By staying informed and proactive, foreign property investors can better manage their Australian investments in this changing tax environment. Remember, obtaining a clearance certificate is now a crucial step in any property sale, and exploring variation notice options could significantly offer you some relief. 

For some comic relief, watch our video skit

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Our team at TJD Accounting Services has over 40 years of experience in handling non-resident tax returns and providing financial guidance to overseas (foreign) investors. Let us help you make informed decisions to help protect your assets and finances.  

Email us at info@tjdaccounting.com.au or call +61 3 9379 4040. 

You may like to read another article feature on TJD Accounting on some possible solutions for foreign property investors: 
https://tjdaccounting.com.au/non-resident-property-owners-in-australia/https://tjdaccounting.com.au/capital-gains-tax-for-foreigners-australia/

Please watch this video as we talk about the significance of land tax on residents and non-residents: 
https://youtu.be/ztrEg_E8EmY