“Prior to 1 January it was only a requirement for $750,000 plus properties and the rate was 12.5 per cent, but now includes all direct property, irrespective of value including vacant land, buildings, residential and commercial property, mining, quarrying or prospecting rights where the material is situated in Australia, and indirect Australian real property interests (IARPI), where the holder has a right to occupy land or buildings on land.”

Busoli said the certification process is free and straightforward, and it is essential that it is completed.

“A clearance certificate can be applied for well in advance of selling a property as they are valid for a year and can be longer for delayed settlement contracts unless there is a change of residency status,” he said.

“They can take up to 28 days to issue or longer if there are complications so early action is advisable as they must be provided to the purchaser before settlement date to avoid the 15 per cent deduction.”

Reasons for a longer processing time include, for example, the vendor not lodging income tax returns recently, a change in residency status, the names on the ATO’s records not matching names on the certificate of title, or if a property is owned by complex entity structures and determining the residency takes longer.

“If the vendor is not a foreign resident, but just failed to provide the certificate in time, they will not be able to access the withheld amount until they have lodged their tax return for the year in which the contract was signed. This cash flow delay can have significant commercial consequences,” Busoli added.

Furthermore, he said where the vendor involves multiple parties, each must provide certification, or the withholding will be applied to their share.

Clearance certificate applications can also be made by legal practitioners, tax agents, conveyancers, real estate agents, solicitors and registered tax agents representing the vendor on their behalf.

“The entity that has legal title to the property applies for the clearance certificate. For an SMSF this should be the trustee of the fund but there may be some instances where another entity is holding the property title in trust for the SMSF,” Busoli said.

“The name on the Certificate of Title and clearance certificate must match and early applications are advisable.”