What is a clearance certificate application?

Short answer: A clearance certificate application is the process a property seller uses to ask the Australian Taxation Office to confirm they are an Australian resident for tax purposes. The certificate proves residency to the buyer and stops foreign resident capital gains withholding being taken out of the sale proceeds at settlement.

What a Clearance Certificate Is and Why It Exists

A clearance certificate is an ATO document that tells a buyer the seller is an Australian resident for tax purposes. If the seller cannot give the buyer a valid certificate on or before settlement, the buyer must withhold an amount from the price and pay it to the ATO under the foreign resident capital gains withholding rules. The certificate stops that withholding for resident sellers and keeps settlement funds flowing as expected.

What Changed on 1 January 2025

Two big changes arrived for contracts signed on or after 1 January 2025. First, the withholding rate increased to 15%. Second, the old dollar threshold was removed, so the rules apply to all property sales regardless of value. In other words, without a clearance certificate, buyers must now withhold 15% of the price on every sale where the vendor cannot prove residency.

Who Needs a Certificate, and When

All Australian resident vendors selling or disposing of Australian real property must obtain a clearance certificate and give it to the purchaser at or before settlement. If the buyer does not receive a certificate in time, they are obliged to withhold. Each named owner on the title needs their own certificate.

What Property Types Are Covered

The regime covers taxable Australian real property. In practice, that includes vacant land, residential and commercial property, and certain mining, quarrying or prospecting rights, as well as some indirect Australian real property interests that give a right to occupy land or buildings.

Validity, Timing and Cost

Good news first. Clearance certificates are free. They are valid for 12 months from the date of issue. Most applications are issued within a few days, although processing can take up to 28 days, so it is wise to apply as soon as you are thinking about selling rather than waiting for a signed contract.

How to Apply Step by Step

You apply online. The ATO's instructions walk you through the form and remind you that you cannot save a part-finished application, so gather your details first. Broadly, you will provide contact details, vendor information, whether you have lodged recent tax returns, and the contract and anticipated settlement dates. You can apply yourself or have a solicitor or tax agent do it. If a conveyancer or estate agent is not a legal practitioner or registered tax agent, they can key in details from a paper form you have signed. Once issued, you will receive the certificate by email or it will be available in your myGov ATO online services.

Names Matter

The first and last name on the certificate must match the Certificate of Title. If your legal name has changed, update the ATO before you apply. Purchasers can rely on the certificate if names match, and they will need to withhold if it is not valid.

When to Apply

Do it early. Applications can be lodged before you list, before auction campaigns, and before a contract is signed. This avoids a last-minute scramble that can derail settlement timing.

Multiple Owners and Special Circumstances

Where there are multiple vendors, each one must give the purchaser their own clearance certificate or variation notice. If one owner is a foreign resident and another is a resident, the buyer withholds 15% on the foreign resident's share and not on the resident's share, provided the resident's certificate is supplied on time. The ATO also outlines special settings for non-individual owners like trusts, companies and super funds, for deceased estates, divorce property transfers and mortgagee sales.

Using One Certificate for More Than One Sale

Because the certificate is issued to the vendor, not to a specific property, many sellers reuse the same certificate in more than one transaction within the 12-month validity period. The ATO's own form notes scenarios where applicants indicate an intention to use a certificate across multiple properties, particularly where interests are held on behalf of other entities. Always check the expiry date against the settlement date and reapply if there is any risk of expiry.

Purchaser Obligations at Settlement

If the vendor does not provide a valid certificate or a variation, the buyer must withhold the foreign resident capital gains amount and pay it to the ATO at settlement. Purchasers lodge an online notification to receive a payment reference number and then pay using BPAY, EFT or at Australia Post. Penalties and interest can apply if a purchaser fails to withhold when required. After payment, a confirmation is given to the seller to help them reconcile their tax return.

Melbourne Specifics, Section 32, and Avoiding Mix-ups

In Victoria, your sale documentation will also include the Section 32 vendor statement, which is separate from the ATO clearance certificate. Section 32 is a legal disclosure document you must give a buyer before they sign the contract of sale. It sits under Part II, Division 2 of the Sale of Land Act 1962 and covers matters like title details, outgoings, planning information and any owners corporation particulars.

Because the names are similar, sellers sometimes confuse the ATO clearance certificate with the property clearance certificate issued by the State Revenue Office. The SRO certificate (previously called a land tax clearance certificate) shows whether there is any land tax, windfall gains tax or commercial and industrial property tax secured as a charge on the land. You might order one as part of your Section 32 searches, but it does not replace the ATO certificate and does not stop federal withholding. In short, Melbourne settlements often need both certificates for different reasons.

Frequently Asked Questions

Is a clearance certificate still required if I am selling my main residence?

Yes. The requirement depends on residency status, not on the property being your home or an investment. A resident vendor gives a certificate to avoid withholding.

How long does it take?

Many certificates issue within a few days, although the ATO says it can take up to 28 days. Apply early so your buyer is not forced to withhold at settlement.

What if our names on the title have changed?

Update your legal name with the ATO before applying, then ensure the names match the title. If names do not match, the buyer may have to withhold.

We are joint owners. Do we both apply?

Yes. Each vendor needs their own certificate. If one owner cannot supply a valid certificate, the purchaser withholds on that owner's portion.

Can I apply before I list the property or book an auction campaign?

Yes, and you should. Certificates are free and valid for 12 months, so getting yours in hand helps your agent and your conveyancer keep settlement on track.

What does the buyer actually do if we do not provide a certificate?

The buyer must lodge the ATO's purchaser payment notification to obtain a payment reference number, then withhold and pay the 15% at settlement. They will give you proof of payment afterwards.

Putting It Into Practice in Melbourne

If you are selling in Melbourne, line up your clearance certificate alongside your Section 32 and marketing timeline. For private sales and auctions alike, a tidy file helps you move fast when offers land. A simple rhythm works well.

Three to Six Weeks Before Listing

Brief your conveyancer to prepare the Section 32 searches and draft. Start the ATO clearance certificate application and check all names against the title.

Campaign Period

Keep the certificate handy, as buyers will ask for it during negotiations. If you plan to sell more than one property in the next year, diarise the expiry date.

Contract Signed

Send the certificate to the purchaser's side. If a co-owner's certificate is delayed, talk to your conveyancer immediately so settlement planning can adjust.

Pre-settlement

Make sure any SRO property clearance certificate for your Section 32 is up to date and that council, water and owners corporation adjustments are in hand. Remember, the SRO certificate is separate from the ATO one.

Common Mistakes That Slow Settlements

Applying late: Leaving the application to the week of settlement can backfire. If the buyer has not seen a valid certificate, they must withhold.

Name mismatches: An old surname on the ATO record or a missing middle name on the title can cause validation issues. Update records before applying.

Assuming one certificate covers everyone: Couples, co-owners, company titles and trustees each need their own paperwork.

Mixing up certificates: The SRO's property clearance certificate checks state land tax and similar charges. The ATO clearance certificate deals with federal withholding. You usually need both for a smooth Victorian settlement.

Why This Matters for Your Bottom Line

A 15% withholding on a $800,000 sale is $120,000. If a resident vendor forgets to provide a certificate, that money is paid to the ATO on settlement day and the seller has to wait until their tax return is assessed to get it back. That can put the brakes on your next purchase, bridging finance or renovation plans. The certificate is free and quick to arrange, so it is one of the easiest wins in your pre-sale checklist.

Conclusion and Next Steps

If you are preparing to sell in Melbourne, treat the clearance certificate like your passport to settlement. Apply early, keep names consistent with the title and coordinate it with your Section 32. It is free, it is valid for a year and it can save a very expensive surprise on settlement day.

Need help, fast? Pearson Chambers Conveyancing is here to guide you through the ATO clearance certificate application, prepare or review your Section 32 and keep your sale moving. Call 03 9969 2405 or email contact@pearsonchambers.com.au for more details and a free Section 32 contract review.