Compliance
Foreign Residents and Property Sales: Navigate Australia’s FRCGW Changes That Hit January 2025
Foreign resident sellers now face a fixed withholding rate for all sales of Australian property without a threshold, but you can still reduce the withholding via variations—here’s a compliance roadmap.
By NomadicTax Research Team • 5-8 min read • March 11, 2026
## What Changed with Foreign Resident Capital Gains Withholding (FRCGW)
On **1 January 2025**, Australia removed the **$750,000 threshold** for FRCGW and set the withholding rate uniformly to **15%** of the property’s contract price, applicable to all foreign residents disposals of taxable Australian real property. ([ato.gov.au](https://www.ato.gov.au/forms-and-instructions/rental-properties-2025/whats-new-in-the-rental-properties-guide?utm_source=openai)) Previously, only non-residents disposing of property over $750,000 were subject to this withholding at a rate of 12.5%. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-residents-and-variations?utm_source=openai))
## Who is Affected?
- All foreign residents selling Australian real estate—including empty land, rentals, indirect property interests. ([ato.gov.au](https://www.ato.gov.au/forms-and-instructions/rental-properties-2025/whats-new-in-the-rental-properties-guide?utm_source=openai))
- Purchasers must withhold the full rate unless the vendor is an Australian resident with a **clearance certificate**, or a foreign vendor with a **variation notice**. ([ato.gov.au](https://www.ato.gov.au/forms-and-instructions/rental-properties-2025/whats-new-in-the-rental-properties-guide?utm_source=openai))
## How to Manage Withholding Amounts
- **Clearance Certificate**: Australian residents must obtain this from the ATO before settlement so purchasers withhold nothing.
- **Variation Notice**: Foreign vendors can apply to reduce the 15% withholding if facts justify a lower rate; the notice must be presented *before settlement*. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-residents-and-variations?utm_source=openai))
## Compliance Risk and Penalties
- Failure to withhold the required amount could leave the purchaser liable to the ATO.
- Vendors will overpay if unable to lodge tax returns or declare gains properly. Foreign sellers should gather documentation early (cost base, improvement records, foreign tax credits) to support any claims for variation.
## Example Walkthrough
Ahmed is a foreign resident selling an Australian rental property for **$500,000** on 15 February 2025. Without a variation notice, purchaser withholds **15%** ($75,000). Ahmed estimates his tax liability at $40,000, so applies for a variation notice and gets the withholding reduced to match estimated liability. He submits the notice before contract settlement. After filing his tax return, he can claim credit for amounts withheld. ([ato.gov.au](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-residents-and-variations?utm_source=openai))
## Key Takeaways
- Don’t delay applying for variation or clearance—settlement timeframe is tight.
- Maintain excellent records of property purchase costs, renovation expenses, and valuation outcomes.
- Seek professional advice especially for cross-border tax obligations or when foreign residency status is ambiguous.