Why Australian Property Sellers Risk Losing 15% to the ATO—Are You Prepared?

Australian property sellers must now comply with updated regulations from the Australian Taxation Office (ATO) or risk having 15% of their property's sale price withheld.

Effective from 1 January 2025, the ATO has broadened its Foreign Resident Capital Gains Withholding (FRCGW) requirements to include all Australian residents selling property. Previously, these rules applied only to foreign property owners or residents with properties valued at $750,000 or more.

Under the revised legislation, sellers must obtain a clearance certificate from the ATO to confirm their residency status for tax purposes. This certificate must be presented to the buyer on or before settlement to avoid withholding.

Key Changes to the Withholding Rules:

• Applies to all property sales regardless of value (removal of the $750,000 threshold).
• Withholding rate increased from 12.5% to 15% of the sale price.
• Contracts signed on or after 1 January 2025 are subject to the new regulations; earlier agreements remain unaffected.

These changes follow the passage of the Treasury Laws Amendment Bill on 28 November 2024, further strengthening the ATO’s efforts to ensure tax compliance across the property sector.

What Sellers Need to Know:

Failing to present a clearance certificate by settlement means 15% of the sale proceeds will be withheld by the buyer and remitted to the ATO. Any withheld amount can only be recovered once the seller lodges their next income tax return, potentially delaying access to funds.

While most clearance certificates are processed within a few days, the ATO advises sellers to apply early, as approvals can take up to 28 days, with each certificate remaining valid for 12 months.

How Auswide Buyers Agency Can Help

Navigating these new regulations can be complex, especially for those buying property for the first time. Auswide Buyers Agency can provide expert guidance and support for buyers in the Australian property market.