Photo by RDNE Stock project: https://www.pexels.com/photo/a-man-and-woman-standing-beside-a-table-with-a-person-8292836/The foreign resident capital gains withholding (FRCGW) regime has had a rate rise and includes all property owners, including owners of residential, commercial and vacant land. The changes apply to all property sales contracts dated 1 January 2025 and beyond, regardless of the sale price.
To be exempt from FRCGW the seller must provide a clearance certificate — proving they are an Australian resident for tax purposes — to the buyer at the time of settlement, if not before.
Buyers who do not receive the clearance certificate from the seller are required to withhold 15% of the property sale price. The amount withheld will be paid directly to the Australian Taxation Office (ATO).
Non- residents for Australian tax purposes, may vary the rate of tax withheld by lodging a FRCGW variation application that includes a calculation of the capital gain or loss applicable to the property. The estimated tax on any gain realised is then equated to a percentage of the sale price. A variation certificate containing the varied rate is to be provided to the buyer, who is then able to withhold at the varied rate.
Amounts withheld and paid to the ATO are offset against the seller’s tax liability that is determined when they lodge their income tax return including the property sale.
Other details
Applications for the clearance certificate are free and can be found on the ATO’s website.
Each seller will need to apply and provide their contact details, tax number, date of birth and residency status.
The clearance certificate must be in each seller’s name as shown on title documents.
The clearance certificate lasts 12 months from the date of issuance and normally takes just a few business days to process.
Australian tax residents should apply for the certificate as soon as you decide to sell a property.
Non-residents for Australian tax purposes should apply for a variation certificate as soon as the sale price is known.
If settlement occurs before you have your certificate, the buyer must withhold tax at 15% and forward it to the ATO.
This article contains general information that should not be considered as advice. A small change in a factual situation can significantly alter the tax result arising from a transaction. This firm accepts no responsibility or any form of liability from reliance upon or use of its contents without further consultation with us.
