Withholding at settlement: FRCGW clearance certificates and GST withholding in an Australian conveyancing matter

Two withholding regimes bite at an Australian property settlement. Foreign resident capital gains withholding is 15 per cent with no value threshold for contracts dated on or after 1 January 2025, so every vendor needs an ATO clearance certificate. GST at settlement applies separately to new residential premises. MatterFirst, a practice management platform for Australian law firms, diarises both deadlines.

Neither regime is complicated. What makes them dangerous is that both are satisfied by a document that must exist before settlement, and that document takes time to get. A clearance certificate applied for on the morning of settlement is not a clearance certificate. Below: what each regime requires, the order the steps happen in, and the dates a conveyancing file should carry from the day it opens.

Two regimes, two different triggers

Both can apply to one transaction. A developer selling a new apartment is a supplier for GST withholding and a vendor for FRCGW at the same time, and the two amounts are calculated on different bases.

Foreign resident capital gains withholding: every vendor now needs a certificate

For contracts entered into on or after 1 January 2025, the withholding rate rose from 12.5 per cent to 15 per cent and the $750,000 property value threshold was removed, so the rules apply to all property sales. Clayton Utz records that contracts entered into before 1 January 2025 are not affected by the change, but that where an option was granted before that date and exercised after it, the new regime applies to the resulting contract.

The practical consequence is the one that catches firms out: the certificate is now needed on every residential sale, not only the expensive ones.

What the vendor does. An Australian resident vendor applies to the ATO for a clearance certificate and gives it to the purchaser before settlement. Clayton Utz notes that where the property is in more than one name, each vendor must obtain a certificate, and that a certificate is valid for 12 months. RSM states that the ATO service standard for issuing a certificate is 28 days, and that a settlement agent, lawyer or accountant can apply on the vendor's behalf.

Twenty eight days is the number that should drive the file. It is longer than the gap between exchange and settlement on many contracts, which is why the application belongs at the listing stage, not in the settlement checklist.

What a foreign resident vendor does. A foreign resident cannot obtain a clearance certificate, and instead applies for a variation of the rate, which can be to nil where there is no capital gain or the tax on the gain would be less than the amount withheld. That application also takes time, and also has to reach the purchaser before settlement.

What happens if the certificate is missing. The purchaser withholds 15 per cent and pays it to the ATO. An Australian resident vendor is not permanently out of pocket, but is out of pocket until a tax return is lodged and the credit claimed, which on a July contract can be most of a year. That matters most where the vendor needs the proceeds to fund a purchase the same day. On the other side, a purchaser who should have withheld and did not can face a penalty, so purchaser representatives have a direct reason to insist on sighting the certificate.

GST at settlement: the supplier notice is the trigger

Since 1 July 2018, a purchaser of new residential premises or potential residential land may have to withhold GST from the price and pay it to the ATO rather than to the supplier.

The notice obligation sits on the supplier, and it applies in both directions. The Western Australian Consumer Protection settlement industry bulletin records that all sellers of residential premises or potential residential land must give the purchaser a supplier notification stating whether the purchaser must withhold GST and remit it to the ATO. If no withholding is required, the notice has to say so clearly. That is the part firms forget: a vendor of an ordinary established house still owes the purchaser a notice saying no withholding applies, and the usual home for it is a clause in the contract.

The amount. Grant Thornton sets out the two bases: 1/11th of the contract price, excluding settlement adjustments, for a fully taxable supply, and 7 per cent where the margin scheme applies, with scope for a higher amount up to 9 per cent determined by the Minister in a legislative instrument.

The forms. Two lodgements sit on the purchaser side, named in the bulletin as Form One, the GST property settlement withholding notification, and Form Two, the GST property settlement date confirmation. A purchaser can authorise a settlement agent to lodge them, and the agent must hold the signed declaration first. Settlement is not conditional on the payment, but penalties can apply if it is not made.

The timing. The bulletin states the amount must be paid to the ATO on or before settlement, generally at settlement or the day before.

The dates a conveyancing file should carry

Put these in the matter as dates, not as items on a mental list. The order matters more than the individual deadlines, because two of them are gated by an external body.

Where these go wrong

The failure patterns are consistent, and almost all are diary failures.

• The certificate is in one name and the title is in two. Each registered owner needs their own certificate. A joint tenancy with one certificate means withholding on the other half.
• The name on the certificate does not match the name on title. Trustees, companies and vendors who have changed their name are the usual sources. The certificate has to match the entity disposing of the property.
• The certificate expires before a delayed settlement. Twelve months is generous until a finance clause stretches or a notice to complete pushes settlement past the anniversary. Diarise the expiry and re-check it whenever the settlement date moves.
• The GST notice is missing from an ordinary residential contract. The obligation applies whether or not withholding is required, so the "no withholding" notice is still owed.
• The margin scheme is assumed rather than confirmed. The amount changes from 1/11th to 7 per cent, and getting it wrong leaves either a shortfall or a vendor short of funds.
• Nobody owns the forms. Form One and Form Two sit on the purchaser side, and where an agent's authority has not been signed the lodgement quietly does not happen.

How MatterFirst handles this

MatterFirst is a legal practice management platform for Australian law firms, built by North Cape Technology in Melbourne. The relevant pieces for withholding work are the obligations engine, document AI and automations, and the firm configures them around its own precedents rather than receiving a withholding rule pack out of the box.

Matter management carries custom matter types, so a conveyancing matter can hold the fields this work needs: certificate application date, certificate expiry, whether a supplier notice was given, which withholding basis applies. Key dates sync to the calendar, so the certificate expiry and the settlement date sit in one view. The obligations and limitation dates engine calculates key dates from rules and cites the governing statute on the date it produces, in the manner of a limitation date citing the Limitation Act 1969 (NSW) s 14(1), so a date in the file can be traced to the provision behind it.

Document AI extracts key terms from uploaded documents, and custom extraction rules let a firm define the fields that matter to its own paperwork: a rule that reads a clearance certificate for the vendor name, certificate number and expiry, or a contract for the GST notice clause and margin scheme election, so those values land on the matter rather than in someone's memory.

Automations run on trigger, condition and action rules, and generating a document can be an action in a workflow: the certificate request letter produced when a sale matter opens, or a task raised when a settlement date moves past a recorded expiry. The client portal gives the vendor somewhere to upload the certificate rather than emailing it.

Two honest limits. MatterFirst does not lodge ATO forms: Form One and Form Two go through the ATO's own channels, and the matter file records the lodgement and payment references. The integrations connectable self-serve today are Xero, Stripe, Microsoft 365 and Google Workspace, so check the current integrations list against what your stack depends on. Trust accounting compliance review covers NSW, VIC, QLD and WA, and data and AI processing run in the AWS region the firm chooses, Sydney by default for Australian firms, as set out on the security page.

How the platforms compare

These cells were read from each vendor's own public pages while writing. Where a page did not state a fact, the cell says so.

Clio is commonly shortlisted alongside these. Its Australian pages did not return content while we were writing, so we have stated no figures for it.

Read it two ways. If state settlement adjustment calculations are what your practice runs on, LEAP publishes that capability for every state and territory and MatterFirst does not. If what you need is onshore hosting you can point to, named trust compliance jurisdictions, and a price that does not move every time you add a paralegal, the per workspace model is the difference. The evaluation checklist sets out the questions to put to any vendor on this, including ours.

Who this suits

MatterFirst suits Australian firms of roughly two to twenty fee earners that want onshore hosting, trust accounting built for Australian jurisdictions, and a document engine that is deterministic by default. Pricing is per workspace, from $199 AUD per month with users included, which favours firms with support staff who need access but do not bill. See the pricing and AI pricing pages.

It suits you less well if you need a packaged library of state conveyancing forms and settlement adjustment calculators on day one, or if a connection to an electronic lodgement network or search provider is a requirement rather than a preference. Those are fair reasons to choose something else.

Frequently asked questions

Does every vendor need an ATO clearance certificate now, even on a low value house? Yes. For contracts dated on or after 1 January 2025 the $750,000 threshold was removed, so an Australian resident vendor needs a current certificate to avoid 15 per cent being withheld.

How long does an ATO clearance certificate take? RSM states the ATO service standard is 28 days, though certificates are often issued faster. Treat 28 days as the planning number and apply at listing.

What happens if the clearance certificate arrives after settlement? It is too late to stop the withholding. An Australian resident vendor claims the credit when lodging a tax return, not at settlement.

Do I have to give a GST notice on an ordinary established home? Yes. The supplier notification obligation applies to sellers of residential premises and potential residential land whether or not withholding is required, and where it is not required the notice has to say so clearly.

Does MatterFirst handle Victorian trust accounting? Yes. The trust accounting compliance review workflow covers NSW, VIC, QLD and WA. If you practise in SA, TAS, ACT or NT, matters can be recorded in all eight jurisdictions, but the compliance review workflow covers those four states.

Can MatterFirst lodge the GST withholding forms for me? No. Form One and Form Two go through the ATO's own channels. MatterFirst holds the dates, the lodgement references and the documents on the matter.

Does MatterFirst connect to PEXA? Check the current integrations page before you rely on it either way. The integrations connectable self-serve today are Xero, Stripe, Microsoft 365 and Google Workspace, and anything beyond those runs through the documented REST API and webhooks.

Sources

Figures above come from the Clayton Utz, RSM, WA Consumer Protection and Grant Thornton material linked above. Confirm the current position on the ATO's pages for foreign resident capital gains withholding and GST at settlement before acting on a file.

This is general information about process and systems, not legal or tax advice on a particular transaction. Rates, thresholds and forms change, so confirm the current position on the ATO pages above before you rely on it.