C&G’s Guide to Clearance Certificates

Taking effect from July 1st 2017, the Australian Government has announced changes to clearance certificate requirements for real estate transactions. In today's blog, C&G break down relevant information for buyers and vendors. 

Clearance certificates act as proof of exemption from capital gains tax for Australian vendors. Clearance certificates aren’t something new – but they previously only applied to properties with a sale price over $2m. Recent changes taking effect from July 1 mean that any property sold for over $750,000 will now need to comply with clearance certificate requirements. Learn more on the ATO website here.

Why do I need a clearance certificate?

Vendors of Australian real estate who are foreign investors are subject to foreign resident capital gains tax on their sale. The ATO takes measures to ensure that these dues are paid by instructing buyers to reserve a portion of capital gains tax on its behalf, preventing foreign investors from leaving the country with an unpaid tax bill. The clearance certificate effectively provides proof of exemption from capital gains tax for Australian citizens.

I'm a buyer: does this affect me?

When you buy a property, the clearance certificate should be provided to your solicitor or conveyancer. This will clarify whether you need to reserve capital gains tax from your purchase. If you fail to check whether you are required to withhold, you could be liable for penalties.

I'm a vendor: what do I need to do?

Changes to clearance certificate requirements will now affect more Australian vendors than ever. Allow plenty of time prior to your sale or auction to obtain yours, assisted by your conveyancer or solicitor.

My home won't sell for more than $750,000. Do I need to apply?

If you're certain there is no possibility of your property selling for more than $750,000, then you needn’t apply for a clearance certificate. But should your expected sales result be anywhere near the $750,000 mark, it's worth applying for a clearance certificate just in case. 

If you're a vendor or a buyer unsure of matters surrounding clearance certificates and your obligations, ensure to ask your solicitor or conveyancer for more information. They will be best placed to answer your individual concerns. The information provided in today’s blog is of a general nature only, so be sure to make your own enquiries. As always, Chisholm & Gamon’s friendly team are ready to assist vendors and buyers as we move forward into the new financial year. 

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