ATO Clearance Certificate: What Queensland Property Sellers Must Know
From 1 January 2025, every Queensland seller needs an ATO clearance certificate before settlement or the buyer will withhold 15% of the sale price. The previous $750,000 threshold has been removed and the rate has increased from 12.5% to 15%.
Since 2016, Australia has had a foreign resident capital gains tax (CGT) withholding regime. Under this regime, buyers of Australian property above a certain price threshold are legally required to withhold a portion of the purchase price from the seller and remit it directly to the Australian Taxation Office (ATO), unless the seller provides a clearance certificate confirming they are an Australian resident for tax purposes.
When this law was introduced, the threshold was $2 million. It was later reduced to $750,000, and from 1 January 2025 the threshold has been removed entirely and the withholding rate has increased from 12.5% to 15%. The regime now applies to every residential property sale by a foreign resident regardless of value, which means every Queensland seller (foreign or resident) needs to think about a clearance certificate before settlement. See the ATO source at ato.gov.au.
What is an ATO clearance certificate?
An ATO clearance certificate is a document issued by the ATO confirming that the seller is an Australian resident for tax purposes and is therefore not subject to the foreign resident CGT withholding requirement. It is not a tax clearance in the traditional sense. It does not confirm that you have paid your taxes or that no CGT is owed. It simply confirms your residency status for tax purposes, which determines whether the withholding regime applies to your sale.
The certificate is free to apply for. It can be applied for online through the ATO's website or through a tax agent. Critically, it is time-limited: a clearance certificate is generally valid for 12 months from the date of issue. If you apply early and the sale takes longer than expected, check whether the certificate remains valid at settlement.
What happens if you do not provide one?
If you do not provide a valid clearance certificate to the buyer before settlement, the buyer is legally obligated to withhold 15% of the purchase price and remit it to the ATO. This is not discretionary. The buyer's conveyancer will advise them of this requirement and they have no choice but to comply.
To put this in practical terms: if your property sells for $1,200,000 and you have not provided a clearance certificate, the buyer's conveyancer will direct $180,000 of the purchase price to the ATO rather than to you at settlement. You will receive $1,020,000 on settlement day instead of the full $1,200,000. You then need to lodge your tax return and have the ATO reconcile the withheld amount against any actual CGT liability. If you owe no CGT (because the property was your main residence, for example), the full $180,000 will eventually be refunded. But that process can take months, and you will not have access to those funds in the meantime.
This can create serious practical problems. If you are using the sale proceeds to fund a simultaneous purchase, a bridging loan, or to discharge a mortgage, having $180,000 (or more) withheld at settlement can disrupt your financial arrangements significantly.
Processing times and why you need to apply early
The ATO's published processing time for clearance certificates is 28 days, but in practice the time can vary. During peak periods, processing can take longer. The ATO can also request additional information, which extends the timeline further.
The practical advice is straightforward: apply for your clearance certificate as soon as you list the property. Do not wait until you have a signed contract. By the time you receive an offer, negotiate terms, and execute a contract of sale, you may only have four to six weeks until settlement. That is not enough lead time if the ATO takes the full processing period or requests more information.
Applying at the time of listing is a simple step that costs nothing and removes all risk of a withheld settlement. There is no downside to applying early.
Joint ownership, trusts, and companies
If the property is jointly owned, each owner needs their own clearance certificate. The certificate is personal to the individual. You cannot use one certificate to cover two or more owners.
If the property is held in a trust or a company, the application process is different and the certificate applies to the entity rather than the individual. The legal entity (the trustee or the company) must apply in its own capacity. Your conveyancer or accountant can guide you through the correct application process for your ownership structure.
If you are unsure about the ownership structure and what it means for your application, speak with your accountant before listing. Getting this wrong does not affect whether the withholding regime applies. It just means you may apply for the wrong type of certificate and need to start again.
How the certificate fits into the sale process
Your conveyancer will include the provision of the clearance certificate as a standard condition in the contract of sale. The vendor is required to provide a valid certificate to the buyer's conveyancer before settlement. In practice, this means your conveyancer will ask you to provide the certificate well in advance of the settlement date so they can forward it to the buyer's side in time.
If you have not yet applied or your application is still being processed close to settlement, your conveyancer will flag this as a risk. They cannot guarantee the certificate arrives in time. The buyer's conveyancer will proceed with withholding if the certificate is not in hand by settlement day, regardless of whether your application is pending.
The practical checklist for Brisbane sellers
When you make the decision to sell, add the ATO clearance certificate application to your very first preparation checklist, alongside engaging a conveyancer and getting a building inspection done. It is a 10-minute online form. The certificate itself is free. The only real risk is not applying in time and having a portion of your settlement funds withheld while you wait for the ATO to reconcile the account.
Your real estate agent should raise this with you at your first listing appointment. If they have not, raise it yourself. Ask your conveyancer to walk you through the current processing times and when they need the certificate in their hands to guarantee a clean settlement. Plan backwards from that date, add a comfortable buffer, and apply immediately.
Thinking about selling? Daniel walks every vendor through the practical preparation steps before a campaign starts, including the clearance certificate, what to spend on presentation, and how to price accurately for your suburb. Get in touch for an honest appraisal.