Updates to the foreign resident capital gains withholding

14 Jan 2025

Starting from 1 January 2025, changes to the Foreign Resident Capital Gains Withholding (FRCGW) rules will impact all property transactions in Australia.

These updates are designed to improve the collection of tax liabilities from non-residents but will also have significant implications for Australian residents selling property.

Here’s what you need to know.

 

What’s Changing?
  1. Increased Withholding Rate:
    • The withholding rate will rise from 12.5% to 15%
  2. Removal of the $750,000 Threshold:
    • Previously, withholding only applied to property sales valued at $750,000 or more.
    • From 1 January 2025, the rules will apply to all property sales, regardless of the sale price.
  3. Clearance Certificate Requirement for Australian Residents:
    • Australian residents selling property must obtain an ATO clearance certificate and provide it to the buyer at or before settlement.
    • Without this certificate, the buyer must withhold 15% of the sale price and pay it directly to the ATO.
 

How This affects Australian property sellers

If you are an Australian resident selling property, here’s what you need to do:
  1. Apply Early for a Clearance Certificate:
    • Most certificates are issued within a few days, but some can take up to 28 days.
    • Certificates are valid for 12 months, so you can apply even before listing your property for sale.
  2. Understand Withholding Implications:
    • If a clearance certificate is not provided at settlement, 15% of the sale price will be withheld.
    • This withheld amount will only be refunded after your next income tax return is processed.
  3. Foreign Residents Selling Property:
    • Non-residents can apply to the ATO to vary the withholding rate based on their circumstances.
Why Are these changes happening?
The FRCGW rules aim to ensure that tax liabilities owed by non-residents selling Australian property are collected efficiently. However, the removal of the $750,000 threshold means these rules now apply to all property transactions, making it essential for Australian residents to stay informed.
 

Steps to take now

Whether you’re planning to sell your home or simply want to be prepared, here are some tips:
  • Start Early: Apply for your clearance certificate well before signing a contract to avoid settlement delays.
  • Consult Professionals: Work closely with your real estate agent and conveyancer to ensure all documentation is in order.
  • Stay Informed: Keep an eye on updates from the ATO and your real estate agency about how these changes could affect your sale
How we can help

At Peard Real Estate, we’re here to guide you through these changes. Our experienced team will help you understand the requirements and ensure a smooth selling process. From applying for clearance certificates to navigating settlement, we’ve got you covered.
For any questions or assistance, don’t hesitate to reach out. Let us make your property transaction stress-free and straightforward in 2025 and beyond.
 

Ready to Sell? Contact us today to learn more about how these updates affect you and how we can help you achieve the best outcome for your property sale.
 
 

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