Tax Planning

Navigating Foreign Resident Capital Gains Withholding: Planning Tips for 2025-26

Foreign investors and resident sellers must understand the revised Foreign Resident Capital Gains Withholding rules which now apply to all taxable Australian property sales—no matter the value.

By NomadicTax Research Team • 5-8 min read • March 22, 2026

## The New Landscape: FRCGW Rules as of 1 January 2025 Australia's Foreign Resident Capital Gains Withholding (FRCGW) regime changed significantly on **1 January 2025**: - Withholding rate increased from **12.5% to 15%**. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/preparing-for-changes-to-australian-foreign-resident-withholding-tax-on-capital-gains-rules/?utm_source=openai)) - The minimum threshold of AU$750,000 was removed—**all sales of Taxable Australian Property (TAP)** are now subject to FRCGW withholding. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/preparing-for-changes-to-australian-foreign-resident-withholding-tax-on-capital-gains-rules/?utm_source=openai)) “TAP” is broad—it includes land, buildings, mining rights, and indirect interests such as shares in companies or trusts whose value is derived from such property. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/preparing-for-changes-to-australian-foreign-resident-withholding-tax-on-capital-gains-rules/?utm_source=openai)) ## Planning for Foreign Investors (and Australian Resident Vendors) ### For Foreign Investor Vendors: - **Know your obligations**: You will be subject to 15% withholding by purchasers or lessees at settlement in TAP sales unless you provide a variation or other relief. Apply for variation if your actual income tax liability is less. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/preparing-for-changes-to-australian-foreign-resident-withholding-tax-on-capital-gains-rules/?utm_source=openai)) - **Clearance certificate**: You may seek a certificate from ATO confirming reduced withholding if applicable. This requires being up-to-date with Australian tax affairs. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/preparing-for-changes-to-australian-foreign-resident-withholding-tax-on-capital-gains-rules/?utm_source=openai)) ### For Australian Resident Vendors: - **Obtain a clearance certificate early**, especially if the sale is before mid-2025, to avoid unnecessary withholding. Note that certificates may take some time. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/preparing-for-changes-to-australian-foreign-resident-withholding-tax-on-capital-gains-rules/?utm_source=openai)) - **Plan timing**: If the contract date is near the transition, be certain which rules apply. Post-1 January 2025 contracts are under new rules. ([grantthornton.com.au](https://www.grantthornton.com.au/insights/client-alerts/preparing-for-changes-to-australian-foreign-resident-withholding-tax-on-capital-gains-rules/?utm_source=openai)) ## Implications for Transaction Structures - Review indirect interests (e.g., through trusts, companies) to assess whether principal asset tests classify them as TAP or indirect TAP. Valuation of underlying assets matters. ([bdo.com.au](https://www.bdo.com.au/en-au/insights/budget/2024/changes-to-the-foreign-resident-capital-gains-tax-regime?utm_source=openai)) - Be aware of the “notification requirement” for foreign residents disposing of membership interests exceeding **AU$20 million** before declaring the interest is _not_ indirect Australian real property; a notice to the ATO may be required at least 28 days before settlement or relevant event. ([pwc.com.au](https://www.pwc.com.au/tax/tax-alerts/proposed-changes-to-Australias-foreign-resident-capital-gain-tax-regime.html?utm_source=openai)) ## Examples & Scenarios - **Foreign resident sells residential property in Sydney valued at AU$600,000**: Under the old rules, threshold meant no withholding. Now, withholding of 15% applies on full property value unless a clearance certificate is given. - **Indirect interest via shares in a trust owning real estate**: If trust’s underlying value is primarily from Australian property assets, and you declare the shares are non-indirect, you may still need to notify the ATO if over AU$20 million OR risk misclassification. ## Actionable Steps - Foreign residents (or their agents) should consult tax advisors familiar with **FRCGW and CGT events** early in any property transaction. - Australians selling property must ensure paperwork for clearance is in order—delays into settlement can be costly. - Maintain full documentation on asset ownership, valuations, percentage of Australian real property exposure, and tax residency status. - For those with large memberships or trusts, run modelling to see whether new rules change your tax or cash flow significantly. ## Bottom Line The FRCGW reforms reshape withholding risk for both foreign and local vendors. Unless carefully managed, new withholding can bite hard. With the removal of thresholds, every property deal must now consider foreign status and related tax compliance. Proactivity and documentation are key.