I'm selling my property — what's this 'clearance certificate', and why would 15% be withheld without it?

You're selling a place — the family home, an investment unit, a block of land — and somewhere in the conveyancing paperwork your solicitor asks whether you've applied for your 'clearance certificate' yet. It sounds like a formality, the kind of thing you leave for later. It isn't. If it's not in the buyer's hands by settlement, they are legally required to hold back 15% of your sale price and send it to the ATO — on a $1.2 million sale, that's $180,000 that doesn't reach your account on the day.

What the rule actually is — and that it changed on 1 January 2025

Foreign resident capital gains withholding (FRCGW) requires the purchaser of Australian property to withhold a set percentage of the price and pay it to the ATO, unless the seller proves they are an Australian resident for tax purposes. For contracts signed on or after 1 January 2025, that rate is 15% of the property's value.

Two things changed at the start of 2025, and both widened the net. Before then, the rate was 12.5% and it only applied to property valued at $750,000 or more. From 1 January 2025 the rate rose to 15% and the price threshold was removed entirely — so it now applies to every property sale, at any value, from a $400,000 unit to a rural block. The old comfort of 'my place is under $750,000, so this doesn't affect me' no longer holds.

The part that surprises Australian sellers: the default is to withhold

Here's the misconception that quietly costs people money. Most sellers assume this is a foreigner's problem — that because they're an Australian citizen or resident, it simply doesn't apply to them. The rule works the other way around. The default position is that 15% is withheld on every sale; being an Australian resident is the exception, and you have to actively prove it. The proof is a clearance certificate from the ATO, given to the buyer at or before settlement. No certificate, no exception — the buyer must withhold, even from a lifelong Australian selling their own home.

The certificate itself is free and straightforward. You can apply online as soon as you're thinking of selling — you don't need a signed contract first — and it's valid for 12 months from the date it's issued, so applying early costs you nothing. The catch is timing: the ATO says an application can take up to 28 days to process. Leave it until the week before settlement and you may simply run out of runway. And if a property is in two names, each owner on the title has to apply for their own certificate — one between a couple isn't enough.

If you're a foreign resident, the 15% isn't gone

If you genuinely are a foreign resident — say you bought an apartment in Australia, then moved back overseas, and you're now selling it — you can't get a clearance certificate, so the 15% will be withheld. But it matters what that 15% actually is: it isn't a final tax and it isn't lost. It's a prepayment against the capital gains tax you'll owe on the sale, held by the ATO in the meantime.

You claim it back by lodging an Australian tax return for the year the contract was signed, declaring the capital gain (or loss) on the sale. The amount withheld is credited against your actual tax bill — and if 15% of the whole sale price turns out to be more than the tax on your real gain, which it often is because the withholding is on the gross price rather than the profit, the difference comes back to you as a refund. There's also a way to reduce it up front: a foreign resident who expects little or no tax on the sale can apply to the ATO for a variation before settlement, so a smaller amount — or nothing — is withheld in the first place, instead of waiting a year to reclaim it.

So the practical version is simple. If you're selling any Australian property, apply for your clearance certificate the moment selling crosses your mind — it's free, it lasts a year, and it's the one piece of paper standing between you and 15% of your price being parked with the ATO for months. If the title is in joint names, everyone on it applies. And if you're a foreign resident, the withholding still isn't the end of the story — a return afterwards, or a variation beforehand, is how the numbers get squared.

This is general information current as at July 2026, not advice for your situation — how these rules apply depends on your residency, who's on the title, and the type of property. If you're selling an investment property, or you've moved overseas and are selling a place you kept in Australia, lining up the certificate or the variation before you sign is far cheaper than untangling a withheld settlement afterwards. That is what our property investor tax service is for.