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The Tax Office is seeing mistakes being made with applications for clearance certificates for property purchases.
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ATO reports spike in errors with clearance certificates
29 April 2024
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The ATO has offered tips and guidance for completing applications for clearance certificates which are required for avoiding a foreign resident capital gains withholding amount.
In a recent update, the Tax Office reminded those entering property transactions that purchasers must withhold 12.5 per cent of the purchase price for transactions above $750,000 unless the vendor has obtained a valid clearance certificate.
Vendors who are Australian residents for tax purposes can avoid having this amount withheld, the foreign resident capital gains withholding (FRCGW) amount, when they have a clearance certificate at or before settlement, the ATO said.
“Recently we've been seeing errors with applications when different types of entities require a certificate and must have a legal title to a property being sold,” the Tax Office warned.
The ATO outlined that when a vendor is partnership, trust or a super fund, the name on the Certificate of Title for the property and the clearance certificate must match and all parties on the Certificate of Title, whether they are individuals or company trustees or partners must apply for the clearance certificate.
“When names don’t match, the clearance certificate is not valid and the purchaser is required by law to withhold 12.5 per cent of the purchase price for transactions above $750,000,” the ATO said.
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“Check the name listed on the Certificate of Title for the property and apply for the clearance certificate in the name of the individual or corporate trustee or partner(s) to match the title.”
The ATO also explained that vendors who are a corporate trustee must be listed in the associate details on the Australian business register (ABR).
“Check the associates’ details in the ABR are updated with the current corporate trustee details for both the company and the trust.
“If a corporate trustee doesn’t have a tax file number (TFN), include an attachment in the application providing the details of the relevant trust,” the ATO said.
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