ATO Clearance Certificates – What you need to know

An important consideration when selling and buying property in Queensland is an Australian Taxation Office (ATO) Clearance Certificate – what is it? Why would you need one? And what are the parameters around needing one and why?

Our Top Gun Conveyancing team has all the information for you – and here is what you need to know:

What is an ATO Clearance Certificate?

The ATO Clearance Certificate indicates that a seller of Queensland property with a market value at $750,000 or more is an Australian resident for taxation purposes. 

The certificate therefore removes the need for a buyer to retain an amount from the sale to submit to the ATO for the seller’s Capital Gains Tax (CGT) liability.

Unless the seller shows the buyer a clearance certificate for the property with a market value of $750,000 or more, the onus is then on the buyer to withhold 12.5% of the purchase price and submit that to the ATO. A notice can be issued to the seller by the ATO varying the CGT withholding amount to nil, in this case, negating the need for the withholding amount.

Without the ATO Clearance Certificate, it may lead to a holdup in the completion of the sale and as a seller, you cannot delay settlement if you don’t have one in place.

What happens with the 12.5% CGT withholding if there is no Clearance Certificate?

It is calculated on the agreed sale price, the buyer retains that amount and is required to transfer it to the ATO. 

For example, for a $1 million property with no ATO Clearance Certificate, $125,000 is retained by the buyer and submitted to the ATO, the seller receives $875,000 at settlement.

Whose responsibility is it to pay the CGT withholding amount?

It is the buyer’s responsibility to pay the 12.5% of property value CGT withholding amount to the ATO. Should the buyer not comply and not pay the CGT withholding amount to the ATO, a penalty can be applied to the buyer (equal to the original amount required to be paid). 

I’m thinking of SELLING a property with a market value over $750,000 – what is the process to get a Clearance Certificate, how long does it take and how long does it last?

If you are thinking of going to market soon with your Queensland property, we advise you  to apply sooner rather than later. 

Currently, the turnaround time is 28 days for the ATO to issue the Clearance Certificate, but in most cases it will be a lot quicker. Since the ATO Clearance Certificate is valid for 12 months from the date of issue, Top Gun Conveyancing advises to apply for one when you list your property for sale. 

You apply through the ATO.gov.au website (follow the link or just search ATO Clearance Certificate).

What is the cost of an ATO Clearance Certificate?

Nothing. The application is a simple application online through the ATO website. If Top Gun Conveyancing is representing you as a seller, we can act as your agent in applying for the Clearance Certificate, however most clients chose to apply themselves as it is a pretty quick and easy process and requires some personal information.

I’m an aged pensioner and am about to sell my property – do I require an ATO Clearance Certificate?

If your Queensland property’s market value is $750,000 or above, yes.

I’m an overseas resident without Australian residency selling a property over $750,000 market value – how do I negotiate an ATO Clearance Certificate?

You can’t. Your purchaser will have to retain the 12.5% and submit it to the ATO, which will offset against any future Capital Gains Tax liabilities. In some cases, you may be able to receive a notice from the ATO varying your CGT liability to nil.

My property has a market value of $650,000 – do I need a Clearance Certificate?

No. Only a property with a market value of $750,000 or above requires one.

I’m BUYING a property over $750,000 – you’re talking a lot about sellers. What is my obligation here and what do I have to do?

As part of Top Gun Conveyancing’s retainer, we’ll contact the seller to see if they have the ATO Clearance Certificate. You will hope they have been advised to have that available and can easily forward that to us, which we will hold on your file, satisfying your obligation to the ATO.

If the seller is not an Australian resident for taxation purposes, or doesn’t have the certificate, it is then a process for us at Top Gun Conveyancing to work with the seller’s solicitor and your Queensland real estate agent to retain the required 12.5% of the price and submit it to the ATO. 

I’m a buyer – do I need to apply for an ATO Clearance Certificate?

No. The onus is purely on the seller. When you start your journey with Top Gun Conveyancing in buying your real estate in Queensland, we will be able to run you through the full process.

Anything else – as a seller or buyer – that I need to take into consideration?

Yes, there are a few things:

• Make sure the name of the seller matches that on the certificate of title and that in the ATO database for the property
• The date on your ATO Clearance Certificate must be valid and fall within the time period of you coming to settlement, otherwise the 12.5% of agreed market value will have to be withheld by the buyer
• As a seller, you must provide the buyer with a copy of the certificate prior to settlement, otherwise, again the 12.5% will be withheld by the buyer

The ATO Clearance Certificate is another consideration when buying or selling property in Queensland that is in the $750,000 or more range. Whether you are a buyer or seller, our Brisbane and Sunshine Coast-based conveyancers at Top Gun Conveyancing are best placed to advise you on the up to date rules relating to these requirements in the Brisbane, Gold Coast, Sunshine Coast and Queensland markets.