Foreign Resident Capital Gains Withholding changes impact Australian property transactions

Corporate and Commercial Advisory

minutes reading time

DATE PUBLISHED: March 6, 2025

key takeaways

All Australian real property transactions entered into from 1 January 2025 require each seller to obtain a Foreign Resident Capital Gains Withholding (FRCGW) clearance certificate from the Australian Tax Office (ATO), unless the transaction is otherwise exempt.
The previous minimum transaction value of $750,000 for requiring a FRCGW clearance certificate has been removed.
The FRCGW withholding rate has been increased from 12.5% to 15% of the sale price or market value.

When do you have to obtain an FRCGW Certificate?

Since 1 July 2016, a buyer of real property in Australia has been required to withhold a percentage of the purchase price at settlement unless:

1
each seller obtains a clearance certificate from the ATO and provides it to the buyer before settlement; or
2
the transaction is otherwise exempted from the FRCGW regime.

Failure to obtain a clearance certificate by settlement can be problematic for a seller as a portion of the purchase price will be withheld and remitted to the ATO for income tax assessment purposes. This could be a considerable amount depending on the value of the transaction.

The law prior to 1 January 2025

Prior to 1 January 2025, the FRCGW regime imposed a withholding requirement of 12.5% for real property transactions with a purchase price of $750,000 or more, unless a FRCGW clearance certificate was obtained, or the transaction was otherwise exempted.

The law on and from 1 January 2025

From 1 January 2025:

1
the $750,000 minimum transaction value has been removed; and
2
the buyer’s withholding obligation has increased to 15% of the sale price or market value of the transaction.

If you purchase property and the seller does not provide a current FRCGW clearance certificate, you must withhold 15% and pay this amount to the ATO.

Buyers that fail to comply with the FRCGW requirements may be liable to pay a fine equal to 10 penalty units (currently $330 per penalty unit), or the amount they failed to withhold plus interest.

It is imperative that:

1
each seller of real property obtains a FRCGW clearance certificate by settlement to avoid part of the purchase price being withheld and remitted to the ATO; and
2
a buyer receives a current FRCGW clearance certificate by settlement or otherwise complies with their withholding obligation.

You can apply online here to obtain an FRCGW Clearance Certificate with the ATO.