Why do I need clearance from the ATO to sell my home?
Got ATO Clearance To Sell Your Home?
Did you know that if you’re selling your home you may need a capital gains tax withholding clearance certificate from the ATO? If you don’t, you may find a chunk of the sale proceeds from your home going to the tax man. The online process to obtain the certificate is quick and simple. Make sure you don’t get stung and get the certificate early.
In the market to sell your house? Before you call in the real estate agents and home stylists, you probably know that you’ll need to have a contract of sale. Did you know that you may also need to get a capital gains tax withholding clearance certificate from the ATO? This certificate allows the ATO to identify whether withholding is required from the sale of Australian property and applies to any property where the contract price is $750,000 or above.
In the current market conditions, the $750,000 threshold means the need to obtain the clearance certificate would apply to the majority of real estate sales in capital cities and some larger regional centres around Australia. If you’re an Australian resident selling your home or investment property, applying for a certificate means that the purchaser will not have to withhold 12.5% of the purchase price. The online application process with the ATO is simple and requires only a few personal details, such as name, DOB, address, and TFN, in the case of an individual applicant.
For company applicants, name, TFN and ABN information are usually required. For trusts and superannuation funds, if the entity that has legal title to the asset is the trustee (in its capacity as either a company or an individual), then the trustee should apply for the clearance certificate using their own TFN or ABN (ACN can also be included as an attachment to the application).
It should be noted that even though the clearance certificate does not have to be provided to the purchaser until on or before the date of settlement (to ensure no withholding occurs), the online form should be lodged as soon as possible as it can take up to 14 working days to process.
If you’re a foreign resident and you’re selling a property in Australia, you do not need to obtain a capital gains tax withholding clearance certificate as it doesn’t apply to you and you will be subject to the 12.5% withholding. However, you can apply to the ATO for a variation of the withholding rate in certain circumstances or make a declaration that a membership interest is not an indirect Australian real property interest and therefore not subject to withholding.
Just signed a contract to purchase a property for over $750,000? You should check with your conveyancer or lawyer that the vendor has provided the capital gains tax withholding clearance certificate or a declaration specifying that withholding isn’t required before settlement. Otherwise you must withhold 12.5% of the contract price of the property and remit the amount to the ATO upon settlement of the property.
If you are selling your property, we can help you obtain your clearance certificate as well as outline any capital gains tax consequences and whether any exemptions are available. We can also help you determine whether you are a foreign resident for tax purposes if you’re unsure. Before you embark on perhaps one of the biggest financial decisions of your life, contact us to ensure everything is as safe as houses.
30 May 2018
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.