The ATO clearance certificate every Queensland seller now needs

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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A tax aimed at foreign residents has become a piece of paperwork for every Australian who sells a property. Under the foreign resident capital gains withholding rules, the buyer of Australian real estate must hold back 15 per cent of the price and pay it to the Australian Taxation Office unless the seller hands over a clearance certificate by settlement. Since 1 January 2025 there has been no price below which the rule switches off. A $300,000 block in Bundaberg and a $3 million house in Ascot are treated alike.

The certificate costs nothing and is usually issued without fuss. The trouble comes when nobody thinks of it until the week of settlement. This guide explains what the withholding is, who must apply for a certificate and in what name, how long it takes, what a buyer has to do, and where Queensland sales most often come unstuck. It describes the general rules as the ATO publishes them and is not advice on any particular sale.

Australian Taxation Office, foreign resident capital gains withholding pages, updated June and August 2026.

What the withholding is for

Australia taxes foreign residents on capital gains made from Australian land. Collecting that tax after the event is difficult when the seller lives overseas and the sale proceeds have left the country. The withholding regime solves the problem at the source. It makes the buyer, who is present at settlement and holds the money, responsible for sending part of the price to the ATO.

The amount withheld is not the tax itself. It is a payment on account. The seller lodges a tax return, the actual capital gain is worked out, and the amount withheld is credited against whatever is owed. If the tax is less than the amount withheld, the difference comes back as a refund; if it is more, the seller pays the balance.

The difficulty for a buyer is that there is no reliable way to tell, across a contract, whether a seller is a foreign resident for tax purposes. Tax residency is not the same thing as citizenship or visa status, and it is not recorded on a title. The law therefore reverses the question. Every seller is treated as a foreign resident unless they prove otherwise, and the proof is a clearance certificate issued by the ATO.

That design is why a rule about foreign residents reaches a retired couple in Toowoomba who have never lived anywhere else. The ATO says it without qualification: all Australian residents for tax purposes who sell or dispose of Australian real property must have a clearance certificate and give it to the purchaser at or before settlement.

How the rule tightened on 1 January 2025

For most of its life the regime had a floor that kept ordinary sales out of it. The ATO's pages record the earlier settings: a withholding rate of 12.5 per cent, applying only where the property was worth $750,000 or more. A seller under that figure needed no certificate, and for years that covered a large share of Queensland house and unit sales.

From 1 January 2025 both settings changed. The rate rose to 15 per cent and the threshold was removed altogether. The ATO now states that withholding applies regardless of the sale price.

The practical effect was to turn an exception into a routine. Before 2025 a conveyancer acting on a $600,000 sale could ignore the regime. Now the certificate belongs on the checklist for every sale file, beside the title search and the mortgage release.

Who has to apply, and in whose name

The certificate is personal to the seller, and the ATO's instructions on names are where many delays begin.

Each person on the title needs their own certificate. A couple who own their home jointly make two applications and receive two certificates. One certificate in one spouse's name does not cover the other.

The name on the certificate has to match the name on the title. The ATO says the first and last names must match the certificate of title for the purchaser to accept it, that middle names are optional, and that titles such as Dr or Ms do not need to match. A seller who bought under a maiden name and never updated the title, or whose name is spelt one way at the Titles Registry and another way at the tax office, has a mismatch to resolve before the certificate is useful.

Where the owner is not an individual, the entity that holds the legal title applies. For a family trust or a self-managed super fund that is the trustee, and the ATO says trustees apply in their own capacity; a corporate trustee is identified by its Australian Company Number or its tax file number. The certificate is issued in the trustee's name because that is the name on the title, not the name of the trust.

Deceased estates follow the same logic. The executor or administrator who has become the registered owner applies as trustee, and the ATO notes that the description "as executor for" is not needed on the application.

Foreign residents are the one group that cannot obtain a certificate. The ATO's page is explicit that they must apply for a variation instead, which is a request to have the amount withheld reduced because the tax actually payable will be lower than 15 per cent of the price.

When to apply and how long it takes

The ATO's advice on timing is blunt: apply as soon as a sale is being considered. It says applications can take up to 28 days to process and issue, and that lodging at least 28 days before settlement is essential.

Not every application takes that long, but 28 days is the figure to plan around, because the ATO says some applications take longer still. It lists the circumstances that lengthen the wait: income tax returns that were lodged only a short time ago, a change in the applicant's residency status, names that do not match title records, and complex entity structures.

That list describes a fair number of real sellers. A person who has come home after several years working overseas has a changed residency status. A trust with a corporate trustee is a structure. Someone who has not lodged a return for a few years because their income was below the threshold may have nothing on file for the ATO to check against.

A certificate is valid for 12 months from the date of issue, provided the seller's residency status does not change. There is therefore no penalty for applying early. A seller who applies when the property is listed will hold a certificate that remains good through a long marketing campaign and a delayed settlement.

In Queensland the timing matters more than in some other states because standard residential settlements are often short. A contract with a 30-day settlement leaves almost no margin if the application is lodged on the day the contract is signed and then takes the full period.

What happens when there is no certificate

If a seller has not provided a certificate by settlement, the buyer has no discretion. The ATO says the purchaser must withhold up to 15 per cent of the sale proceeds and pay it to the tax office.

The sum involved is large because it is calculated on the price, not on the gain and not on the seller's equity. On an $850,000 sale it is $127,500.

Consider what that does at settlement, using illustrative figures. A seller is owed $850,000 and has a mortgage of $600,000 to pay out. With $127,500 withheld, $722,500 reaches the settlement, the bank is paid and the seller receives $122,500 less costs, in place of $250,000. That seller is inconvenienced and waits for a refund.

Now assume the mortgage is $760,000. The $722,500 that reaches settlement is $37,500 short of what the bank requires to release its mortgage. Unless the seller can find that money elsewhere, the lender will not hand over a release and the sale cannot complete on the day. A seller who was relying on the proceeds to settle a purchase the same afternoon has a second contract at risk as well.

The money is not lost. The ATO says the seller claims the amount withheld as a credit in their tax return for the income year in which the contract was signed. For a contract signed in August, that return cannot be lodged until after the following 30 June. The cost of a missing certificate, for a resident seller who owes little or no tax, is the use of that money for many months.

What the buyer has to do

The legal obligation sits with the buyer, which is why the buyer's conveyancer or solicitor will ask for certificates early and will not accept an assurance in their place.

Where withholding applies, the ATO requires the purchaser to pay the amount at or before settlement and to lodge a purchaser payment notification form, which identifies the property, the parties and the sum. In an electronic settlement the payment to the ATO is simply one more destination for funds on the settlement schedule.

A buyer who fails to withhold when the law requires it does not escape the liability by having paid the seller in full. This is the reason a buyer's representative checks each certificate carefully: that there is one for every person on the title, that the names match, and that the date of issue is within 12 months at settlement.

Buyers sometimes worry that withholding means they pay more. They do not. The price is unchanged; part of it is redirected. The buyer's own costs, including transfer duty, are calculated on the full price in the ordinary way.

Sellers who are not straightforward

Several kinds of seller need more preparation than a single online form.

Expatriates and returning residents come first. A Queenslander living and working overseas may be a foreign resident for tax purposes even though they hold an Australian passport and intend to come home. If so, they cannot obtain a clearance certificate and must look at a variation instead. A person who has only just returned has a changed residency status, which the ATO lists among the reasons an application takes longer. Residency for tax purposes is a question of fact with its own tests, and it is one to settle with a tax adviser well before a contract is signed.

Couples with one overseas partner are a related case. Because each owner needs a certificate, a jointly owned property where one owner is a resident and the other is not will have one certificate and one gap. How much must be withheld in that situation is a matter for the conveyancers on both sides to confirm against the ATO's rules.

Estates raise timing questions. An executor selling a property may be dealing with a title still in the name of the person who died, with the transmission to the executor not yet registered. Since the certificate has to match the registered owner, the order of the paperwork matters.

Trusts, companies and super funds apply through whoever holds the title. The ATO lists complex entity structures among the reasons for slower processing, so the advice to apply early applies with extra force.

Some transactions are not sales of land at all but are still within the regime. The ATO's pages deal separately with options over property and with indirect interests, meaning shares or units in an entity whose value lies mainly in Australian land, and they provide for vendor declarations in some of those cases. These are specialist matters; an ordinary house sale is not affected by them.

Variations: when 15 per cent is too much

A variation is the mechanism for a seller who cannot get a certificate, or for a situation in which 15 per cent of the price would plainly exceed the tax. The ATO's page lists variations beside clearance certificates as a separate application.

The typical applicant is a foreign resident who will make a small gain or none: someone selling for less than they paid, or a seller whose lender will take most of the proceeds. A successful variation produces a notice stating a lower rate, sometimes nil, which the seller gives to the buyer in the same way as a certificate. Without one, the buyer withholds the full 15 per cent.

A variation requires the ATO to look at the facts of the sale, so it cannot be left to the last week any more than a certificate can.

Statements, penalties and good faith

The certificate system depends on sellers telling the ATO the truth about their residency. The ATO warns that a vendor who makes a false declaration is liable for making a false and misleading statement and may be prosecuted.

For buyers, the protection is the document itself. A buyer who receives a certificate that is valid on its face, in the right names and within date, has what the law asks for. The buyer is not expected to investigate the seller's tax affairs.

What a bill before Parliament would add

The regime is still being adjusted. A bill introduced to federal Parliament in July, the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026, contains a package of foreign resident capital gains measures. The accounting firm KPMG reported that it passed the House of Representatives on 21 August 2026 and moved to the Senate.

Summaries by PwC and Grant Thornton describe what is in it: a statutory definition of real property for the purposes of taxing foreign residents, a test that looks back over the 365 days before a sale to decide whether a company or trust is land-rich, and a requirement for sellers in transactions worth $50 million or more to notify the Commissioner before certain withholding exemptions can be relied on.

Those measures are aimed at large commercial and infrastructure transactions and at sales of interests in entities. Nothing in the published summaries changes the 15 per cent rate, the nil threshold or the clearance certificate process for a person selling a house, a unit or a block of land. As at the date of this guide the bill has not passed the Senate.

A short list for the sale file

The rules above reduce to a handful of habits, which is how most Queensland conveyancers now treat them.

• Apply for the certificate when the property is listed, not when the contract is signed. It lasts 12 months and costs nothing.
• Make one application for each person or entity on the title.
• Compare the names on the title with the names the ATO holds before applying, and fix a mismatch first.
• Allow the full 28 days, and longer where residency has changed, returns are behind or a trust or company is involved.
• If the seller is or may be a foreign resident for tax purposes, look at a variation and seek tax advice early.
• If acting for a buyer, check every certificate for names and dates, and be ready to withhold and notify the ATO if one is missing.

The certificate is one of the simplest documents in a sale. It only becomes a problem when it is the last thing anyone remembers.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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