What’s Changed for FRCGW as of 1 January 2025
The Foreign Resident Capital Gains Withholding (FRCGW) regime now includes two major changes from 1 January 2025:
- The withholding rate increased from 12.5% to 15%.
- The $750,000 threshold was removed, meaning all levels of property contracts signed on or after that date may now require withholding.
These changes apply to individuals and non-individuals disposing of taxable Australian real property or similar interests. (ato.gov.au)
Who Needs a Clearance Certificate and Why
If you are an Australian resident disposing of property, you must obtain a clearance certificate from the ATO before settlement to avoid withholding. If you don’t, the purchaser is obliged to withhold 15% from the contract price unless you supply the relevant certificate. (ato.gov.au)
For foreign residents, withholding applies automatically, but you may apply to vary the amount withheld by supplying a variation notice, often relevant for investors who anticipate capital gains tax offsets. (ato.gov.au)
Practical Tips to Remain Compliant
- Plan early: If selling property later in calendar year, obtain the clearance certificate well in advance. ATO may take time to process.
- Correct documentation: Ensure sale contracts correctly reflect use of clearance certificate or variation notice.
- Cash flow management: Withholding may reduce settlement proceeds significantly—budget accordingly.
- Consult tax professionals: For international sellers especially, calculating potential capital gains tax vs withholding obligations.
Example: Australian Investor Selling Rental Property
Jane, Australian resident, plans to sell a rental property. She signs a sale contract on 15 January 2025 for AU$500,000.
- Without clearance certificate, buyer must withhold 15% = AU$75,000.
- With certificate, settlement proceeds could flow without withholding, though Jane must still report and pay any capital gains tax when lodging her return.
Australia’s FRCGW amendment is more than a small tweak—it changes the calculation and cash flow implications for almost any property seller. Keeping up means better planning and avoiding unnecessary withholding.