The recent passage of the Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Bill 2024 introduces significant changes to the process of selling property in Australia. Starting as early as 1st January 2025, all sellers, regardless of the property's value, will be required to obtain a "Clearance Certificate" from the Australian Taxation Office (ATO).

Under the previous system, only properties valued over $750,000 required a clearance certificate to prove that the seller was not subject to foreign resident tax. If the certificate was not provided, buyers were required to withhold 12.5% of the purchase price and remit this amount to the ATO. Sellers could later reclaim the withheld amount if they were not foreign residents but had not obtained the certificate in time.

The new law, however, mandates that every seller, regardless of the property's value, must obtain a clearance certificate. If a seller fails to do so, 15% of the purchase price will be withheld at settlement. This change applies to contracts signed after the law comes into effect.

To avoid this withholding, sellers should apply for the clearance certificate well in advance, as it can take time to process through the ATO. Those planning to sell in 2025 should be particularly proactive in applying for the certificate to ensure smooth settlement.

If you need guidance through this new process or have any questions, please contact our Team to discuss.