During the sale process for your property in Sydney you will be asked for this clearance certificate and you may be wondering why and how? Foreign resident capital gains withholding applies to vendors disposing of certain taxable property under contracts entered into from 1 July 2016.

Australian resident vendors should use the Foreign resident capital gains withholding clearance certificate application to notify the ATO that foreign resident capital gains withholding doesn’t need to be withheld from the sale of taxable Australian real property assets.

It provides the details of vendors so the ATO can establish their tax residency status.

If you are a foreign resident, do not lodge an application – if you are entitled to a variation to your CGT liability, lodge a variation request with Rider Tax Accountants.

The application needs to be completed and lodged with the ATO as early as practical to minimise the need to extend settlement dates. It can take up to 28 days to process. You can lodge your application any time, including prior to when a contract of sale is entered into as the certificate is valid for 12 months from the date issued.

The vendor will have to provide the purchaser with an ATO issued clearance certificate on or before the day of settlement of the sale of the asset to ensure no withholding occurs.

Each vendor must lodge their own application. Vendors who are parties to the same property transaction are not able to lodge joint applications.

Who can complete and lodge

A clearance certificate application form should be completed and lodged by Australian resident vendors who don’t wish to have an amount withheld by purchasers.

The entity that has legal title to the asset, is the entity required to obtain a clearance certificate for foreign resident capital gains withholding purposes. Where a purchaser acquires an asset through a sale or transfer, the vendors are the individuals or companies that have legal title to the asset prior to the sale or transfer.

Where the vendor of the asset is the trustee of a trust (for example, an executor of a deceased estate or a trustee of a superannuation fund) it is the trustee that applies for the clearance certificate. The trustee should apply for the clearance certificate using (as the identifier) their:

• own tax file number (TFN), or
• Australian business number (ABN).

To avoid possible delays in issuing a clearance certificate, ensure:

• The associates’ details in the Australian Business Register are updated with the current corporate trustee details.
• Where a corporate trustee does not have a TFN, you must attach the details of the relevant trust and the company’s Australian company number (ACN) to the application.

Where a purchaser acquires an asset that has been granted (such as a lease), the vendors are the grantors of the asset.

Vendors may either complete and lodge the form themselves, or have it completed and lodged on their behalf by a third party (for example, Rider Tax Accountants).

Conveyancers, real estate agents and other persons charging a fee for services can’t complete the form on behalf of the vendor unless they are a legal practitioner or registered tax agent.

However, a vendor may provide a completed paper PDF version of the form to a conveyancer, real estate agent or other person charging a fee for service, who should enter the details in the online form (providing faster processing) as part of the settlement process they provide the vendor.

How to complete the online form

You can’t save an incomplete clearance certificate application form and return to complete it at a later date – the form must be completed and submitted in one session.