Updates from the Australian Taxation Office
In December 2023 the Government proposed changes to the foreign resident capital gains withholding (FRCGW) regime. This legislation has now passed and the changes will apply to contracts entered into on and after 1 January 2025.
Under the changes:
- the withholding rate will increase from 12.5% to 15%
- the $750,000 property value threshold will be removed and the withholding rules will apply to all property sales.
FRCGW is designed to support the collection of tax liabilities owed by non-residents selling Australian property.
All Australian residents selling property will require a clearance certificate from the ATO, or withholding will apply to the transaction. If an Australian resident vendor does not provide a clearance certificate by settlement, 15% of the sale price must be withheld by the purchaser and paid to the ATO.
If an amount is withheld from the sale price, the vendor will only receive any refund due after their next income tax return is processed at tax time.
Most clearance certificates will be issued within a few days, but it is important to apply early because some can take up to 28 days to issue. They are valid for 12 months, so the vendor doesn't need to wait until they have signed a contract.