If you’re planning to sell property in 2025, a recent tax change could impact you if not managed correctly.
Starting January 1, sellers must secure a clearance certificate from the Australian Taxation Office (ATO) to prove their tax residency status. This requirement comes with serious financial implications. Without the certificate, buyers are legally obligated to withhold 15% of the purchase price and pay it directly to the ATO. Sellers would then need to wait until their next tax return to reclaim these funds. To put this in perspective, for a property at Australia’s average price of $814,837, the withheld amount would be approximately $122,225. Not only will this impact your cash flow, but you also lose out on earning interest for the period of time the funds are held by the ATO!
Clearance certificates can be obtained through the ATO, and once issued, certificates remain valid for 12 months. While the ATO typically processes applications within a few days, they advise allowing up to 28 days for completion. Therefore, sellers are encouraged to apply for the certificate early, ideally before listing their property.
Two major changes distinguish this new rule from previous regulations. First, the former $750,000 property value threshold has been eliminated, making the certificate mandatory for all property sales regardless of price. Second, the withholding rate has increased from 12.5% to 15%.
These regulations will apply to all contracts signed from January 1, 2025, onward. You can find more information on the ATO website by clicking here.
Tribel is available to assist with obtaining clearance certificates from the ATO on your behalf – please speak to your Tribel accountant or adviser if you would like more information.
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