Compliance
How Australia’s New Foreign Resident Capital Gains Withholding Regime Affects Property Sellers
Foreign residents selling Australian property now face a 15% withholding rate from contracts signed on or after 1 January 2025. This article helps both foreign and resident vendors understand obligations and strategies around the updated withholding, including clearance certificates and variation notices.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## What’s Changing?
Australia updated its **Foreign Resident Capital Gains Withholding (FRCGW)** regime: as of **1 January 2025**, the withholding rate was increased to **15%** and the threshold removed—any seller of taxable Australian real property is now subject to this withholding unless certain conditions are met. ([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_share-update_update-text&utm_source=openai))
## Who Is Affected?
- **Foreign residents** who sell Australian real estate, including commercial and residential property, as well as interests in leases or mining/quarrying rights. ([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_share-update_update-text&utm_source=openai))
- **Australian residents** selling property may also be affected: they need a **clearance certificate** to avoid having 15% withheld. If they don't provide it, the purchaser is required to withhold. ([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_share-update_update-text&utm_source=openai))
## Key Obligations
- **Ensuring a clearance certificate**: Australian sellers must apply for this certificate before the contract or when requested by the buyer. Without it, the buyer is liable to withhold.
- **Variation notice**: Foreign sellers may reduce withholding if a valid variation notice is provided.
- **Withholding applies at contract signing** for all contracts signed on or after 1 January 2025. Earlier contracts may still benefit from previous rules.
## Practical Example
Imagine you’re a foreign investor selling a commercial property for AUD $2 million:
- Without a variation notice, 15% (AUD $300,000) must be withheld by the purchaser at settlement.
- If you provide a valid variation notice authorising a lower amount, you may reduce the withholding.
- As an Australian resident, you could avoid withholding entirely by obtaining a clearance certificate.
## Strategies for Sellers
- **Plan ahead**: If you’re an Australian resident, apply for the clearance certificate before entering into a contract; delays can hold up settlement.
- **Consult early**: Foreign residents should assess whether a variation notice may apply.
- **Keep good records**: Document ownership status, residency, dates, and property classifications; helps you meet certificate/notice requirements.
- **Tax return reconciliation**: Withheld amounts can be claimed in your income tax return.
## Key Takeaways
- From Jan 2025, **15% withholding** is standard, threshold abolished.
- Australian residents need **clearance certificates**; foreign residents may reduce withholding with variation notices.
- The change aims to improve compliance and ensure capital gains are reported and taxed appropriately.
By understanding and preparing for these obligations ahead of time, property vendors—both foreign and resident—can avoid unnecessary withholding and ensure smoother transactions.