In short
If you buy Australian residential land or other taxable Australian real property from someone who is, or may be, a foreign resident, the law requires you, the buyer, to pay 15% of the price to the Australian Taxation Office (ATO) on or before settlement. This is federal law and applies in every state and territory. The rate is 15% for acquisitions on or after 1 January 2025, and the Act text lists no minimum price. A seller who is an Australian resident avoids the withholding by giving the buyer an ATO clearance certificate.
The rule
Subdivision 14-D of Schedule 1 to the Taxation Administration Act 1953 applies when you become the owner of a CGT asset by acquiring it from one or more entities, at least one of which is treated as a foreign resident, and the asset is taxable Australian real property (or an indirect interest in it, or an option or right to acquire it). Land and buildings in Australia are the usual case.
- Who pays: you, the purchaser, pay the amount to the Commissioner of Taxation.
- When: “on or before the day you became the CGT asset’s owner”, which in a normal sale is settlement. The Act notes penalties for failing to pay.
- How much: 15% of the first element of the asset’s cost base just after the acquisition. As a formula:
amount to pay the ATO = 15% × first element of the cost base
By calculation at that rate, withholding is $15,000 for every $100,000 of that cost-base amount.
- It is a payment on account: the Act describes it as paid “on account of income tax possibly payable” by the seller on their capital proceeds. It is not the seller’s final tax.
Rate and start date in force on 14 October 2026
The Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Act 2024 changed the rate from 12.5% to 15% and repealed one of the excluded-transaction rules in section 14-215. It received Royal Assent on 10 December 2024 and applies to acquisitions on or after 1 January 2025. In the current Act, the only case where nothing is payable is when “the amount that would otherwise be payable is nil” (section 14-200(4)), and the excluded transactions in section 14-215 (for example stock exchange trades and certain insolvency cases) do not include a minimum price. The Act applies the change to acquisitions on or after 1 January 2025; if your contract and settlement straddle that date, ask a conveyancer which rate applies.
Who is treated as a foreign resident
Under section 14-210 the rule applies to a seller if, when the contract is made:
- you know, or reasonably believe, that the seller is a foreign resident; or
- you do not reasonably believe the seller is an Australian resident and either the seller has an address outside Australia in your records for the transaction, or you are authorised to pay to a place outside Australia; or
- the asset is taxable Australian real property or a similar interest. This is the default for land.
So for a purchase of land, the safe path for a seller who is an Australian resident is to give the buyer a clearance certificate.
Clearance certificates
Under section 14-220 the Commissioner may certify that, based on the information before the Commissioner, there is nothing to suggest the seller is or will be a foreign resident during a specified period.
- It is issued on application in the approved form and is in writing.
- It applies only for the purposes of this withholding rule.
- The seller must give it to you before you pay the Commissioner, and it must be for a period covering the time the contract is entered into.
- For land, a residency declaration under section 14-225 does not remove the duty to withhold; the clearance certificate does.
The ATO’s processing time and the certificate’s validity period are on the ATO’s website; apply well before the contract is signed and ask your conveyancer to check the dates.
Variations
Under section 14-235 the Commissioner may vary the amount to be paid, including down to nil. The purchaser, the seller, or an entity owed a debt by the seller may apply in the approved form. Decisions to vary or not to vary are reviewable. A variation is a decision for the ATO; it is the route the Act provides if the standard amount seems too high.
Who this affects
- Australian residents selling need a clearance certificate to avoid the buyer withholding.
- Foreign residents selling can expect 15% to be withheld unless the ATO varies the amount. For the main residence exemption rules for foreign residents, see capital gains tax and your main residence.
- Buyers must make sure the amount reaches the ATO at settlement. See settlement and electronic conveyancing and foreign buyers and FIRB.
What it costs
The withholding is a payment on account of the seller’s tax, not an extra fee; it reduces the cash the seller receives at settlement. The Act sets no fee for a clearance certificate or a variation in the provisions we read. For other selling costs, see selling a home: costs.
Which professional to consult
A conveyancer collects the clearance certificate, calculates the withholding and arranges payment at settlement (conveyancers). A registered tax professional advises a foreign-resident seller on a variation.
Frequently asked questions
Does the 15% apply in every state?
Yes. It is a federal rule in the Taxation Administration Act 1953.
Is there a minimum price?
Not in the current Act: the amount is nil only when the calculated amount is nil, and the excluded transactions list has no price threshold.
What if the seller is an Australian resident?
They should apply to the ATO for a clearance certificate and give it to the buyer before the buyer pays the Commissioner.
Can the amount be reduced?
Yes. The Commissioner may vary the amount, including to nil, on application.
Is the buyer or the seller responsible?
The buyer must pay the amount to the ATO. Penalties apply for failing to pay.