Foreign Resident Capital Gains Withholding Clearance Certificate

Recently the Australian Government made changes to the rules relating to Foreign Resident Capital Gains Withholding (FRCGW).

The FRCGW regime was implemented to assist in the collection of tax liabilities owed by non-residents.

Prior to 1 January 2025, when a property was sold in Australia with a sale price of $750,000.00 or higher, the Seller was required to obtain a FRCGW Clearance Certificate and provide same to the Buyer prior to settlement occurring. If the Seller was unable to provide a valid FRCGW Clearance Certificate to the Buyer prior to settlement, the Buyer was required to withhold an amount equal to 12.5% of the purchase price at settlement and remit same directly to the ATO.

If an amount is withheld at settlement and paid directly to the ATO by the Buyer, the Seller will only receive the applicable refund when their next income tax return is lodged and processed.

There were two major changes made to the FRCGW rules which apply to Contracts entered into on and from 1 January 2025:-

1. The withholding rate increased from 12.5% to 15%; and
2. The $750,000.00 sale value threshold was removed – the withholding rules and requirement to obtain the FRCGW Clearance Certificate now apply to all property sales.

The rules apply to all Sellers, whether it be an Individual, company or trust. In order for the buyer to rely on the FRCGW clearance certificate provided by the Seller: –

1. A valid FRCGW clearance certificate must be provided prior to settlement date; and
2. The first and last names (or company name) on the FRCGW Clearance Certificate must match the certificate of title for it to be valid. Middle names do not need to be supplied or matched.

The ATO processing time to issue the FRCGW Clearance Certificate following an application being made can be up to 28 days. Before selling property it is therefore important to ensure that your legal name in the ATO’s system, and your name on the property title match and accord with the name listed on your identification.

FRCGW Clearance Certificates are valid for one year so if you’re regularly selling property, once you receive your FRCGW Clearance Certificate, you can rely on that certificate for subsequent sales that occur within the one-year timeframe.

Our office will assist Sellers with making their application to obtain a FRCGW Clearance Certificate.

Please do not hesitate to get in contact with our property team if you have any questions regarding the rule changes.