Foreign resident capital gains withholding, and why every seller needs a clearance certificate

Written and reviewed by Brandon Owens, Licensed Conveyancer (licence no. 001729L). Last reviewed 10 September 2026.

This is the rule that most often surprises Australian sellers, because its name suggests it has nothing to do with them. It does. Since 1 January 2025 it affects essentially every property sale in the country.

What changed on 1 January 2025

Foreign resident capital gains withholding is a mechanism for collecting tax from foreign residents who sell Australian property. The purchaser withholds part of the price and pays it to the ATO rather than to the seller.

Two things changed for contracts entered into on or after 1 January 2025:

• The withholding rate rose from 12.5% to 15%.
• The $750,000 property value threshold was removed entirely.

The second change is the one that matters to ordinary sellers. Before 2025, a sale under $750,000 was simply outside the rules. Now there is no minimum value. A $400,000 regional sale is caught in exactly the same way as a $4 million one.

Note that the trigger is the contract date, not the settlement date. A contract signed before 1 January 2025 is assessed under the old rules.

Why an Australian resident seller is affected

The rules do not assume you are a foreign resident. They assume the purchaser cannot tell.

The purchaser has no way of verifying your tax residency, and if they get it wrong, the liability is theirs. So the legislation puts the burden on the seller to prove residency, using an ATO clearance certificate.

The mechanics are simple:

• You give the purchaser a clearance certificate before settlement. Nothing is withheld. You receive the full proceeds.
• You do not. The purchaser must withhold 15% of the sale proceeds and pay it to the ATO at or before settlement, regardless of whether you are in fact an Australian resident.

If that happens, the money is not lost, but it is gone for a while. You recover it by lodging your tax return for that year and claiming the credit. On a $700,000 sale that is $105,000 sitting with the ATO until your return is processed — which is catastrophic if you were relying on those proceeds to settle your next purchase.

Getting a clearance certificate

Applying is free, and it is done through the ATO.

Two numbers matter:

• The ATO says a certificate can take up to 28 days to issue, and recommends applying at least 28 days before settlement.
• A certificate is valid for 12 months from the date of issue, as long as your residency status does not change.

Because it lasts 12 months and costs nothing, the sensible time to apply is when you decide to sell, not when you have a contract. A certificate obtained early can cover the sale whenever it happens, and can cover more than one property sold in that window.

Every vendor on the title needs their own certificate. A couple selling jointly needs two. If only one has a certificate, 15% is withheld from the other’s share.

An important limit on what a conveyancer can do

A conveyancer who is not an Australian legal practitioner or a registered tax agent cannot apply for a clearance certificate on your behalf. They can help you understand what is needed and walk you through the process, but the application has to come from you or from a registered tax agent.

Treat any claim that a conveyancer will simply obtain the certificate for you with caution. What a conveyancer should do is raise it early, tell you plainly that it is your task, and make sure it is not forgotten.

What if you are a foreign resident?

If you are genuinely a foreign resident, the withholding applies and you cannot get a clearance certificate. You can apply to the ATO for a variation if 15% of the sale price is more than the tax actually expected to be payable on the sale — for example where the property sold at a loss, or where the gain is small relative to the price.

A variation has to be applied for and granted before settlement. Like the certificate, it is not something to leave until the last week.

The practical timeline for a Victorian seller

The whole problem is avoidable with one free application made early. It becomes expensive only when it is left late.

How Lodgedwell handles this

On every sale we act on, we raise the clearance certificate at the outset rather than in the week before settlement, confirm that each vendor on the title has applied, and check the certificate details against the contract before settlement. If a certificate is not going to arrive in time, we tell you what the withholding will be so you can plan around it rather than discover it on the day.

This guide is general information about Victorian property law, current at 10 September 2026. It is not legal advice and does not take your circumstances into account. Conveyancing law differs between Australian states, and this page describes Victoria only.