Quick answer
Since 1 January 2025 there's no minimum price: every vendor selling Australian real property needs an ATO clearance certificate at or before settlement, or the buyer must withhold 15 per cent of the price and pay it to the ATO. For a developer relying on sale proceeds to clear a construction loan, a missing certificate can leave a shortfall at settlement. Apply early; it's free and valid for 12 months.
Key points
- From 1 January 2025, clearance certificates apply to property sales of any value.
- Without one, the buyer withholds 15 per cent of the price and pays it to the ATO.
- The ATO says to lodge at least 28 days before settlement; processing can take that long.
- Each vendor on the title needs their own certificate, including trustees and companies.
- On new residential sales, GST withholding at settlement also reduces what reaches you.
Any developer selling finished townhouses, units or lots now needs an ATO clearance certificate for every sale. Since 1 January 2025 there’s no minimum price. If the buyer doesn’t get a certificate at or before settlement, they must withhold 15 per cent of the price for the ATO. When those sales are meant to clear your construction loan, that withheld amount can become a shortfall.
It’s an easy step to miss. The rule is called foreign resident capital gains withholding, so plenty of Australian developers assume it isn’t about them. It is, because the only way to prove you’re not a foreign resident is to hand over the certificate.
What changed on 1 January 2025?
Before 2025, the withholding only applied to sales of $750,000 and above (for contracts from 1 July 2017 to 31 December 2024). A small developer selling a modest unit or a vacant lot often fell under the threshold and never needed a certificate.
The ATO’s guidance on Australian residents and clearance certificates now says the 15 per cent rate applies to the value of all property for contracts on or after 1 January 2025. So the duplex half, the three-bedroom townhouse and the single vacant lot all need a certificate.
What the ATO says about the certificate itself:
- Timing: the buyer needs it in hand no later than settlement day.
- Cost: nothing. Apply online or with the paper form.
- Lead time: budget four weeks, and get the application in at least that far ahead.
- Shelf life: one year, as long as you remain a resident.
- Co-owners: one certificate per vendor, each assessed on its own.
Why does this matter more for a developer than a home seller?
A home seller who misses the certificate loses access to some cash for a while. A developer can have a construction lender waiting at settlement for a set payout figure.
Most construction facilities are repaid from sales. The lender issues a discharge figure for each lot, and the sale proceeds have to cover it. If the buyer withholds 15 per cent for the ATO, the proceeds arriving at settlement drop by that much. Where the margin on the sale is thin, or the lender wants most of the price to release the title, the numbers may not clear. Then you’re finding cash in a hurry or delaying settlement, and a delayed settlement may give the buyer rights under the sale contract.
There’s a second deduction to plan for on new homes. When you sell new residential premises or potential residential land, the buyer generally has to withhold GST at settlement and pay it to the ATO. For fully taxable sales that’s one-eleventh of the contract price. That one is expected and goes into any sensible feasibility. The clearance certificate withholding is the one that catches people, because it’s avoidable.
| What reduces your settlement cash | When it applies | Can you avoid it? |
|---|---|---|
| GST withholding | Sales of new residential premises and potential residential land | No, but it should already be in your feasibility |
| Clearance certificate withholding | Any vendor who doesn’t provide a certificate | Yes, by getting the certificate in time |
| Agent’s commission and legal costs | Every sale | Plan for them |
| Lender’s discharge figure | Every lot with debt against it | Negotiate release figures up front |
Our main page on construction and development finance explains how release figures and settlements fit into the facility.
What slows a clearance certificate down?
Delays usually trace back to a handful of problems. These are the ones developers run into most:
- Unlodged tax returns. A development company or trust that’s behind on lodgements is a red flag for the ATO’s checks.
- Names that don’t match the title. For individuals, first and last names must match. For entities, check the exact registered name.
- Complex ownership. Trusts, joint ventures and co-owned sites take longer to verify.
- Residency changes. A director or co-owner who’s moved overseas may change the picture.
If your development entity has fallen behind on lodgements because the last project ran long, catch up before you list. If the business is carrying an ATO debt too, our page on ATO tax debt loans explains how lenders look at that case by case.
Planning your sales program now and unsure whether the settlement numbers will clear the lender? Talk it through with us; there’s no credit check to enquire.
Illustrative example: four townhouses, one late certificate
Illustrative only. A small family construction company builds four townhouses on its own land. Three are sold off the plan, and the construction lender’s release figure is $780k for each.
The company’s director remembers the clearance certificate a fortnight before the first settlement and lodges straight away. The company’s last tax return is overdue, so processing runs past settlement day. The buyer of the first townhouse must withhold 15 per cent of the $980k price for the ATO. After GST withholding, agent’s fees and that amount, the proceeds fall short of the lender’s release figure.
The company covers the gap with a short-term property-secured loan over a director’s investment property, settles on time and claims the withheld amount back through its tax return later. On the next project, the certificate application goes in when the townhouses are listed, not when the first buyer’s conveyancer asks for it.
When should a developer apply?
The ATO’s advice is to apply as soon as you’re thinking of selling, without waiting for a signed contract. For developers that usually means one of these points:
- When you launch off-the-plan sales. The certificate isn’t needed until settlement, but it costs nothing to sort early. Bear in mind the 12-month life of the certificate if settlements are a long way off.
- About three months before practical completion. That leaves time to fix lodgement or naming issues before the first settlement.
- When you decide to sell lots you’d planned to hold. If plans change, apply before you list.
Pair it with your conveyancer’s settlement checklist and give the lender a copy of the plan. Lenders like seeing a developer who has thought through the exit, including the dull bits. If some stock won’t sell quickly, a residual stock loan or bridging loan can give you time, and our guide on whether to sell or hold finished stock walks through that decision.
What should you tell your construction lender before the first settlement?
Lenders hate surprises at settlement more than almost anything else in a development. A short note to your lender, about six weeks before the first expected settlement, heads off most of them. It should cover:
- The settlement calendar. Each lot, its sale price, the expected settlement date and whether the buyer has finance approval.
- Release figures. Confirm the amount the lender needs to discharge each title, and whether that figure changes as the loan balance falls.
- Deductions at settlement. GST withholding, agent’s commission, legal costs and any adjustments for rates and levies.
- Clearance certificate status. Applied for, issued, or still waiting, and for which entity.
- The fallback. What you’ll do if a buyer’s finance falls over or a settlement is delayed.
That last point is the one most small developers skip. A lender that knows you’ve already lined up a fallback, whether that’s cash, another facility or a plan to hold unsold stock, is far more relaxed about extending a deadline if something slips. A lender that hears about a problem on settlement morning has far fewer options and far less goodwill.
It also helps when you ask for the next facility. Developers who settle cleanly, on time and without drama are the ones lenders want back for the next project.
Settlement shortfall coming? Let’s look at it before the day
If a late certificate, a slow sale or a release figure that won’t quite clear has put a settlement at risk, the time to talk is before the day, not on it. Property-secured funding from $20k to $5m over residential or commercial security can bridge a gap like this for business purposes.
Telling us about it is quick: a minute or so online, and your credit file isn’t touched at that first step. Your enquiry goes to one team, not a pile of lenders, so you won’t be fielding calls from people you’ve never heard of. Someone experienced reads the settlement dates, release figures and security you describe and rings you to work through it. The more accurate the numbers you give us, including any ATO amounts owing, the faster we can put a workable option in front of you.
Frequently asked questions
Do Australian developers really need a clearance certificate?
Yes. The withholding rules exist to catch foreign-resident sellers, but the way they work is that every vendor must show they're not a foreign resident by giving the buyer a clearance certificate. If you don't, the buyer must withhold, whether or not you're a foreign resident.
How long does a clearance certificate take?
Allow four weeks. That's the ATO's outer processing time, so lodge no later than four weeks out from settlement. Overdue returns, a name mismatch with the title, a change in residency or a layered ownership structure can all push it out further.
How long is a clearance certificate valid?
A year from issue, provided you stay an Australian resident throughout. Developers with several settlements spread over a year should time the application with their sales program in mind and confirm with their conveyancer how it will be used.
What happens to the money withheld?
It goes from the buyer straight to the ATO. You get it back as a credit through the tax return covering the year you signed the contract (settlement year doesn't matter). Expect the full amount back only when there's no CGT on the sale and nothing owing to the ATO.
Does my company or trust need its own certificate?
Yes. Whoever is registered on the title is the seller, so that entity applies. A trustee applies in its own name, and if there are co-owners, every one of them needs a separate certificate.
Is this the same as GST withholding at settlement?
No. They're separate. GST withholding applies when you sell new residential premises or potential residential land, and part of the price goes to the ATO to cover the GST. Clearance certificate withholding applies to all vendors who don't provide a certificate. Both can reduce the cash you receive.