Compliance
Compliance Trends: What Businesses Should Know About Foreign Resident CGT Withholding and the ATO’s Push on Trust Reporting
Australia is tightening rules around foreign resident capital gains withholding (FRCGW) and trust beneficiary reporting—businesses and trustees must adapt now to stay compliant.
By NomadicTax Research Team • 5-8 min read • March 21, 2026
## Foreign Residents and Withholding Obligations (FRCGW)
The **Foreign Resident Capital Gains Withholding regime** requires purchasers (or their agents) of certain types of property to withhold tax from payments to foreign vendors—typically **15%** of the purchase price. Legislative changes effective **1 January 2025** now:
* Increase the withholding rate from **12.5% to 15%**. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/matters/2024-completed-matters?utm_source=openai))
* Remove the previous **AUD 750,000 threshold**, extending the regime to all relevant taxable property sales. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/matters/2024-completed-matters?utm_source=openai))
**What this means for businesses and individuals:**
* Australian resident vendors who do not hold a clearance certificate will have this withholding applied—often unexpectedly. Buyers have the obligation to collect and remit.
* Buyers and selling agents should verify vendor status early and request clearance certificates where possible.
* Financial planning: non-resident sellers must structure property transactions to account for withholding and tax liabilities.
## Trusts, Beneficiaries and Trust Administration System Reform
Australia is moving toward enhanced reporting under the **Modernising Trust Administration System** exposure draft. Key features:
* Trustees will report **Beneficiary Tax File Numbers (TFNs)** as part of the trust tax return rather than quarterly. This change applies for income years **starting 1 July 2026**. ([au.andersen.com](https://au.andersen.com/february-2026-monthly-tax-update/?utm_source=openai))
* Clarifies Commissioner’s duties where TFN quoted or reported is incorrect. Ensures data accuracy, aligned with pre-filling initiatives. ([au.andersen.com](https://au.andersen.com/february-2026-monthly-tax-update/?utm_source=openai))
## Why These Compliance Trends Are Important Now
* Risk of **penalties** or miscalculations if FRCGW rules aren’t followed for property transactions. Clearance certificates, disclosure, and correct withholding rates are essential.
* Accurate beneficiary data and TFNs help avoid mismatches in ATO systems, reducing audits or notices. Pre-filling helps taxpayers—but only if data is high quality.
## Actionable Steps for Businesses & Trustees
* For property-related matters involving foreign vendor(s): obtain clearance certificates; ensure all parties know obligations; consult conveyancing or tax professionals.
* Trusts: audit current procedures—how you collect beneficiary TFNs; ensure you have correct records; plan for changes from 1 July 2026.
* Review trust deeds or trustee agreements—can where possible improve reporting processes or amend terms to accommodate new compliance obligations.
* Stay informed on draft legislation texts and public consultations so that you can participate or adjust before laws become law.
## Example Scenario: An Investment Trust
"GreenCapital Trust" has 30 beneficiaries. Under the current system, they report beneficiary TFNs quarterly. With new draft reforms coming for 2026-27:
* They will need to collect and report **all beneficiaries’ TFNs** when filing year-end return.
* If any TFN is missing or incorrect, the trustee may incur compliance risk; data pre-filling may be hampered.
* GreenCapital should begin obtaining TFNs now, tracking accuracy, and reviewing beneficiary communications.
By proactively adapting to these evolving compliance requirements—particularly around foreign investment and trust reporting—businesses and trustees avoid surprises and stay aligned with the ATO’s increasing transparency and integrity focus.