As from 1 July 2017, all Australian home owners who sell their home for more than $750,000 must get a Clearance Certificate from the Australian Taxation Office (ATO) confirming they are not a foreign resident owner.
* In Western Australia, approximately 20% of homes each year (5,000+) sell for more than $750,000. If you, as the home owner/vendor, don’t provide a Clearance Certificate at settlement, the buyer is required to withhold 12.5% of the purchase price ($93,750+) and pay it to the ATO.
Vendors must ensure the details on their clearance certificate application are accurate, so the Clearance Certificate issues in the correct name, matching what is shown on the Certificate of Title of the property.
For the purchaser to rely on the clearance certificate, the ATO requires the following three conditions be met:
- The name of the vendor on the Clearance Certificate must match the name on the Certificate of Title (for details for Trusts and superannuation funds – refer to the ATO website for further clarification)
- the date the certificate is given to the purchaser must be a date that falls within the time period shown on the clearance certificate
- the clearance certificate must be provided to the purchaser before settlement.
It typically takes up to 14 days to get a Clearance Certificate from the ATO. If you leave it too late to apply for one you risk delaying your settlement, which can result in adverse financial consequences.
If an Australian tax resident vendor has withholding tax taken from their sale proceeds, for example because they didn’t provide the purchaser with a clearance certificate, they will be able to claim a credit for that amount when they lodge their tax return. This credit may be refunded if they don’t have to pay capital gains tax on the sale of the property (for example, because it was their main residence).
Refer to the ATO website here for full details.