Compliance
How Foreign Resident Capital Gains Withholding Changes Affect Property Sellers & Investors
Legislative changes from 1 January 2025 tighten rules for foreign resident CGT withholding—raising rates and removing thresholds—significant for Australia’s property market and real estate investors.
By NomadicTax Research Team • 5-8 min read • February 25, 2026
## What changed under the Foreign Resident Capital Gains Withholding (FRCGW) regime
- **Holding Sellers to Account**: From **1 January 2025**, withholding rate increased from 12.5% to **15%**, and the **AUD 750,000 threshold** was removed. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/matters/2024-completed-matters?utm_source=openai))
- **Affected Property Types**: Includes investment properties, vacant land, mining/quarrying rights, indirect interests, etc. ([ato.gov.au](https://www.ato.gov.au/forms-and-instructions/rental-properties-2025/whats-new-in-the-rental-properties-guide?utm_source=openai))
- **Australian residents** must secure a **clearance certificate** to avoid withholding. Foreign residents may provide 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))
## Implications for domestic and foreign sellers
- **Foreign sellers**: more likely to be impacted earlier because rate higher and no threshold. Purchasers must withhold 15% unless variation notice received.
- **Australian residents**: need clearance certificate ahead of contract to prevent withholding.
- **Cross-border or indirect holdings**: Particular caution over indirect Australian real property interests.
## Example scenarios
| Case | Outcome |
|---|---|
| A foreign investor sells a Melbourne apartment valued at AUD 1 million | Purchaser must withhold 15% (AUD 150,000) unless variation notice applies. |
| Australian seller sells a property worth AUD 1M but obtains clearance certificate | No withholding applies. |
| A resident fails to provide clearance certificate in time | Withholding applies; amount can be claimed in tax return, but impacts cash flow. |
## Action steps for investors and sellers
1. **Plan ahead**: Seek clearance certificate **before** signing contracts.
2. **Inititate variation notices** if foreign resident and eligible.
3. **Consult conveyancers or tax attorneys** to verify residency status and asset type.
4. **Review indirect interests or trusts**: many indirect holdings trigger withholding.
5. **Record keeping**: contracts, notices, certificates and valuations are key.
## Broader tax system impacts & compliance
- **Revenue increase**: Government expects higher revenue from non-compliance and foreign holdings.
- **Increased clearance applications**: More domestic residents will apply, increasing administrative burden.
- **Importance of guidance**: ATO has updated guidance and materials for clarity.
**Conclusion**: FRCGW changes mean property transactions are riskier without proper preparation. Both domestic and international stakeholders must understand these rules to avoid unexpected withholding and manage cash flow. With early planning, confusion can be avoided and requirements efficiently met.