What Is An ATO Clearance Certificate

You have an offer on your home in Brunswick, or you are about to list an investment unit in Southbank. The agent starts chasing you for an 'ATO clearance certificate'. If you are thinking, what is an ATO clearance certificate and why does it matter, you are not alone.

An ATO clearance certificate is an official notice from the Australian Taxation Office confirming you are an Australian resident for tax purposes, so your buyer does not have to withhold a chunk of the sale price at settlement. Without it, your purchaser must hold back money and send it to the ATO.

From 1 January 2025 the rules tightened. The withholding rate became 15 per cent, and the old $750,000 threshold was removed. That means every property sale is within scope unless the vendor provides a valid ATO clearance certificate, or the vendor is a foreign resident with a variation that reduces the withholding.

For Melbourne sellers, this is now as routine as ordering a Section 32. The good news is it is straightforward when you know what to do.

Why the ATO Clearance Certificate Exists

The certificate sits inside Australia's foreign resident capital gains withholding regime. The law asks a purchaser to withhold money at settlement when they are buying from a foreign resident. Because a buyer cannot be expected to investigate your tax residency, the ATO uses a simple rule. If you are an Australian resident for tax purposes and you give the buyer a valid clearance certificate at or before settlement, there is no withholding. If not, the buyer must withhold at the current rate and pay the ATO.

That is the policy in one sentence. It prevents funds vanishing overseas without the right tax being accounted for, and it keeps buyers out of trouble by making the rule crystal clear.

What Changed for Property Sales in 2025

Melbourne's property market still moves quickly, yet the paperwork stakes are a little higher now. Two headline changes apply to contracts signed on or after 1 January 2025:

• The withholding rate is 15 per cent of the sale price
• The $750,000 threshold has been removed, so the regime covers all sale prices

If a vendor does not hand over a valid certificate, the buyer must withhold and remit 15 per cent. There is no minimum price threshold anymore.

Who Needs an ATO Clearance Certificate

If the asset is taxable Australian real property, and you are an Australian resident for tax purposes, you need to give the purchaser a clearance certificate so withholding does not apply. This is true for houses, apartments, vacant land, commercial property, and mixed use properties across Greater Melbourne.

It is the legal owner of the property who applies. That can be an individual, a company, or a trustee acting in that capacity. Each vendor on the title needs their own certificate, so if a Carlton terrace is in two names, each person applies separately.

If you are a foreign resident, you do not apply for a clearance certificate. You may instead apply to the ATO for a variation that reduces the withholding if your circumstances justify it.

Buyer Obligations and Certificate Checks

Buyers in Victoria have a statutory obligation. If there is no valid certificate for an Australian resident vendor at settlement, they must withhold 15 per cent and pay it to the ATO. Purchasers are also told to check that names match and the certificate looks valid; if there is a mismatch, withhold. Practically, your conveyancer will place the certificate in the PEXA workspace and the purchaser's side will confirm details during final checks.

When to Apply for Your ATO Clearance Certificate

Timing is Critical for Smooth Settlement

Do not wait for the contract. The ATO encourages vendors to lodge the application as soon as they are thinking of selling, because processing can take up to 28 days in some cases. Many are processed much faster, yet you should plan for the longer timeframe, especially if there are name changes, trust structures, or older records to reconcile. The certificate lasts for 12 months from issue, which easily covers most Melbourne campaign periods.

A quick practical tip if you are listing in late spring: Melbourne's market gets busy through November and December, then settlements cluster into late January and February. Apply before you even book photos. It avoids last minute stress when everyone is juggling public holidays and bank cut-off times.

How to Apply: Step-by-Step Process

You complete the online ATO 'Foreign resident capital gains withholding clearance certificate' application. The form guides you through the questions and must be submitted in one sitting, so have your details ready. The ATO notes that you cannot save an incomplete form and return to it later.

Required Information for Application

What you will usually need:

• Your full legal name exactly as it appears on title records and identity documents. This is critical for the purchaser's checks
• Date of birth for individuals, or ACN and company details for companies
• Tax file number or ABN if available, to speed processing
• Current address and contact details
• Basic details of the property you expect to sell

After you submit, many applications are processed automatically. Others are reviewed, with a service standard of up to twenty eight days. The certificate is then emailed to you or made available through ATO online services, which is handy for forwarding to your conveyancer and agent.

Certificate Validity and Reuse

Your certificate is valid for twelve months from the date of issue. It applies to the named vendor, not to one specific address, so you can use it for multiple property disposals within that period provided the vendor's details are unchanged. If it expires before settlement, you must obtain a new one.

What Happens Without a Valid Certificate at Settlement

If a valid certificate is not supplied at or before settlement, the purchaser must withhold 15 per cent of the sale price and pay it to the ATO. For a $900,000 townhouse in Northcote, that is $135,000. You may later claim a credit when you lodge your tax return, yet you will not have immediate access to those funds for your next purchase or renovation budget. That is a painful cash flow hit, and it can upset the finance for your onward buy.

Special Situations and Common Issues

Multiple Property Owners

Each legal owner needs their own certificate. If you have three siblings on the title of a Coburg block, all three must provide certificates. If one is overseas and is a foreign resident for tax purposes, the purchaser withholds on that person's share; the other two provide their certificates. The ATO example makes this clear.

Trusts and Corporate Trustees

The entity holding legal title applies. For a family trust where a corporate trustee is on title, the trustee applies in that capacity. Getting the name right matters for the purchaser's validation.

Companies and SMSFs

These entities can apply where they hold legal title, again with names matching ASIC records and the title. Your conveyancer will compare the certificate to the title search to make sure it lines up.

Off-the-Plan and Long Settlements

Because validity is twelve months, long settlements can outlast a certificate. If you signed in March and settle the following April, diarise to renew a month before expiry so the new certificate is ready in time.

Name Changes

If you have updated your name since buying the property, ensure title and identification are in sync. Ask your conveyancer early about lodging any necessary name change with Land Use Victoria so the certificate and title particulars match cleanly by settlement. The ATO's guidance to purchasers is clear, if details on a certificate do not match, they should withhold.

Foreign Resident Vendors

If you are a foreign resident, do not apply for a clearance certificate. You may instead apply for a variation to reduce the withholding if, for example, there will be little or no capital gain. Speak to your accountant, then lodge the variation with evidence.

Melbourne Conveyancing Process Integration

In Victoria, the ATO certificate sits alongside your Section 32 vendor statement and contract as standard pre-settlement homework. Agents often include "ATO clearance certificate" in their listing checklist now, since a valid certificate makes the purchaser's life easier and keeps the PEXA workspace uncluttered with last minute surprises. Your conveyancer will usually ask for it when they order title searches and rates certificates. It gets uploaded to the workspace and checked by the buyer's side before final funds are scheduled.

If you are coordinating a sale and purchase on the same day, lining up your certificate early is essential. With the buyer's bank, your bank, the council, the Owners Corporation, and the State Revenue Office all in the mix, removing one risk factor is a relief. A missing certificate can derail settlement timetables and force expensive rescues, like short term bridging.

Certificate Validation for Buyers

If you are purchasing, or you act for the purchaser, do three simple checks the moment a certificate arrives:

• Confirm the vendor's legal name matches title and the contract of sale
• Confirm the certificate is in date on the settlement day
• Confirm it covers the relevant vendor entity, for example, trustee capacity where applicable

If you cannot validate a certificate, the ATO says you must withhold and remit at the applicable rate. You can also phone the ATO to check a certificate or variation if unsure.

Frequently Asked Questions About ATO Clearance Certificates

Is the ATO clearance certificate only for high value properties?

Not anymore. For contracts on or after 1 January 2025, the $750,000 threshold was removed. The withholding rules apply to all property sales unless the vendor provides a valid certificate or holds a variation.

I am an Australian resident and forgot to apply. Can we settle anyway?

You can settle, but the purchaser must withhold 15 per cent and pay the ATO if there is no valid certificate. That money is treated as a credit when you lodge your tax return, yet it can be months before you see it. In a linked sale and purchase, that can cause real stress.

How long does it take to get a certificate?

Many are issued quickly, yet the ATO advises that it can take up to 28 days. Apply as soon as you decide to sell.

How long does the certificate last?

Twelve months from the date of issue. If it will expire before your settlement, apply for a new one.

We are joint owners. Do we need one certificate or two?

Each vendor needs a separate certificate. A purchaser must see one for each Australian resident vendor, and must withhold on any share held by a foreign resident vendor.

What if the property is held by a trust with a corporate trustee?

The legal owner applies, which is the trustee in its capacity. Make sure the certificate reflects that capacity and matches title.

I am a foreign resident. Is there any way to reduce withholding?

You can apply for a variation that reduces the rate if justified. Talk to your tax adviser about the evidence needed, then apply to the ATO.

Does a vendor declaration replace the certificate?

Not for real property. Vendor declarations only apply to certain assets that are not real property. For land or buildings, Australian resident vendors need an ATO clearance certificate.

Real Melbourne Property Sale Example

Sally and Minh were selling their two bedroom flat in Collingwood while juggling a purchase in Kensington. Their agent had ticked off photos, copy and the campaign, yet the ATO certificate slipped down the list. When a keen buyer asked for a short settlement, the purchaser's conveyancer flagged that there was no certificate on file. Cue panic. Luckily, Sally applied that night and received the certificate within days. Lesson learned. Put it on your pre-listing checklist and keep a PDF ready to go. The final week before settlement is not the time to be hunting through email.

Key Takeaways for Melbourne Property Sellers

• If you are selling in Melbourne and you are an Australian resident for tax, apply early for your ATO clearance certificate. It protects your sale proceeds from unnecessary withholding
• From 1 January 2025, the rate is 15 per cent and there is no dollar threshold, so every sale needs a valid certificate unless a variation applies
• The certificate lasts for twelve months and each legal owner needs their own. Match names exactly to title to avoid settlement hiccups

Professional Conveyancing Assistance

If you would like a calm, local guide through the moving parts, Pearson Chambers Conveyancing is here to help. We can organise your ATO clearance certificate alongside your Section 32 and contract, coordinate with your agent, and keep the PEXA workspace tidy so settlement day feels boring in the best possible way.

Email contact@pearsonchambers.com.au for friendly advice and a complimentary Section 32 contract review. We would love to help you move forward with confidence.