Compliance
Compliance Spotlight: Foreign Resident Capital Gains Withholding (FRCGW) Changes in 2025
From Jan-1-2025, significant changes to FRCGW with higher withholding rates and removed thresholds affect all property sales—learn what you must do.
By NomadicTax Research Team • 5-8 min read • November 14, 2025
## 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**:
1. The **withholding rate increased from 12.5% to 15%**.
2. 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](https://www.ato.gov.au/individuals-and-families/your-tax-return/before-you-prepare-your-tax-return/what-s-new-for-individuals?trk=public_post_reshare-text&utm_source=openai))
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## 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](https://www.ato.gov.au/individuals-and-families/your-tax-return/before-you-prepare-your-tax-return/what-s-new-for-individuals?trk=public_post_reshare-text&utm_source=openai))
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](https://www.ato.gov.au/individuals-and-families/your-tax-return/before-you-prepare-your-tax-return/what-s-new-for-individuals?trk=public_post_reshare-text&utm_source=openai))
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## 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.
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## 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.
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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.