Australian resident and foreign investor sellers of real property will be impacted by important changes to the Foreign Resident Capital Gains Withholding Tax (FRCGW) rules. These changes apply to property contracts signed on or after 1 January 2025.
The FRCGW is designed to support the collection of tax liabilities owed by non-residents selling Australian property. However, recent changes now impose obligations on a much broader set of vendors.
Foreign Resident Capital Gains Withholding Tax Rules
For Australian Residents
If you’re an Australian residents for tax purposes selling property, you’ll need to provide a clearance certificate from the ATO to the buyer at or before settlement—regardless of the property’s value. Previously, this applied only to properties worth $750,000 or more.
Without a clearance certificate, 15% of the sale price will be withheld by the buyer and paid directly to the ATO. This means you could face delays in accessing these funds until your next income tax return is lodged and processed. These funds might be critical, for example, if you’re using them to settle on a new property.
For Foreign Residents
If you’re a foreign resident selling Australian property, the withholding rate will increase from 12.5% to 15%, and the $750,000 threshold will no longer apply. These changes mean the FRCGW rules now apply to all property sales, regardless of their value.
Foreign residents may be eligible to apply for a variation to the withholding rate under specific circumstances.
How the Changes Affect You
Apply Early
Clearance certificates can take up to 28 days to process, though most are issued within a few days. Certificates remain valid for 12 months, so you don’t need to wait until you’ve signed a sales contract.
Multiple Owners
If the property has more than one owner, each owner must apply for their own clearance certificate.
Seek Help
You can complete the clearance certificate application yourself or engage a solicitor or accountant to handle it for you. However, real estate agents cannot lodge applications on your behalf.
Getting Ready for the Transition
If you’re unsure about how these rules apply to your situation, a Synectic adviser can guide you through the process, from applying for clearance certificates to understanding the implications of the Capital Gains Withholding rules.
Proper preparation and expert advice can help you navigate these changes smoothly while ensuring your property transactions remain compliant and stress-free.
