10 September 2021
If you’re thinking of selling a property, you probably know all about finding a solicitor or conveyancer and a real estate agent, but did you know that you’ll also need to obtain a clearance certificate from the ATO?
This clearance certificate applies to all transactions involving taxable Australian or an indirect Australian real property interest that provides company title interests, with a market value equal to $750,000 or more. With the mean dwelling price in Australia at $779,000 (according to the latest ABS statistics) and even higher for NSW, Victoria and ACT, you’ll likely need to apply for a clearance certificate if you’re selling.
In the current market conditions, if you’re not sure whether your property will have a market value of $750,000 or more (i.e. if the property is going to auction), the safest thing to do is apply for a clearance certificate. That way, if the property is sold for less than $750,000, you won’t need to provide the purchaser with the certificate. However, if it is sold for $750,000 or more, you’ll have the certificate handy.
The certificate provides certainty to purchasers of properties regarding their withholding obligations. Presenting the purchaser with a valid certificate confirms that withholding tax does not apply to the transaction. Otherwise, the purchaser must withhold 12.5% of the purchase price and remit the amount to the ATO.
When a vendor is an Australian tax resident but fails to provide the purchaser with a clearance certificate, which causes the purchaser to remit a corresponding amount to the ATO, the vendor can claim a credit for the withheld amount when they lodge their tax return. This amount may then be refunded if no CGT is payable on the sale of the property.
To ensure that you’ll receive your certificate on time, the ATO recommends that you apply online at least 28 days before you require it. Applications are processed in order of date of receipt by the ATO. Therefore, vendors should use at the earliest opportunity with the higher volume of property sales during the spring and summer months. According to the ATO, higher risk and unusual cases may require more significant manual intervention, which could take longer.
“We will not disadvantage those other applicants who applied earlier by delaying their application to process yours.” – Australian Taxation Office
Once a clearance certificate is issued, it is valid for 12 months from the date of issue. As long as the vendor provides the certificate to the purchaser during the time specified on it, and this occurs before settlement, it does not matter how long the settlement may be in the future. The vendor name in the certificate can also be used for multiple disposals of real property that occur within the 12 months.
Remember, because the clearance certificate names specific vendors, each vendor will need to apply for a separate clearance certificate in their name if there are multiple property owners. That name also must match the name shown on the certificate of title of the property. However, some slight variation may be accepted in some circumstances provided additional documents are supplied.
Need a clearance certificate?
If you’re thinking of selling a property in this market, we can help apply for a clearance certificate on your behalf and take the hassle away. That way, you can concentrate on more important things like achieving the maximum sell price for your property. Call us today at our offices or email email@example.com
**The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.