Compliance
Tax Planning and Compliance for Foreign Resident CGT Withholding Regime
Understanding the foreign resident capital gains withholding changes: how they affect property and what steps to avoid surprises.
By NomadicTax Research Team • 5-8 min read • April 14, 2026
## What Changed in the FRCGW Regime?
As of **1 January 2025**, the Foreign Resident Capital Gains Withholding (**FRCGW**) regime got tougher: the **withholding rate** increased from **12.5%** to **15%**, and the **AUD 750,000 sale threshold** was removed—so now *all* taxable Australian property (TAP) disposals by foreign persons are subject to withholding at settlement. ([grantthornton.com.au](https://www.grantthornton.com.au/globalassets/1.-member-firms/australian-website/services/tax/pdfs/gtal_2025_recap---australian-international-tax-update.pdf?utm_source=openai))
Australian residents selling property must obtain a **clearance certificate** from the ATO before settlement. If not provided, the purchaser must withhold and remit 15% of the sales price—even if the seller is a resident. ([grantthornton.com.au](https://www.grantthornton.com.au/globalassets/1.-member-firms/australian-website/services/tax/pdfs/gtal_2025_recap---australian-international-tax-update.pdf?utm_source=openai))
## Who Is Affected?
- **Foreign residents** disposing of land, buildings, mining/petroleum interests, leases, or similar assets with connection to Australia.
- **Australian residents** selling such property—they need to apply for the clearance certificate if they are not foreign residents.
## Why Is This Important?
- Non-compliance can lead to cash flow issues: purchaser withholds 15% at settlement **regardless** of the actual capital gain or loss. Refunds only later if they provided proper certification.
- More sale transactions are now caught: the removal of the property value threshold means smaller sales are no longer exempt.
## Practical Steps to Ensure Compliance
- When selling Australian property, get that **ATO clearance certificate** *before* the deal is finalized.
- Double-check residency status: if you’re a foreign resident or joint ownership, get legal/tax advice.
- In lease or premium arrangements over property, ensure obligations are met similarly.
- Consider negotiating buyer-seller agreements to handle withholding obligations and refunds where possible.
## Example Scenario
John, a foreigner who owns a Brisbane apartment, sells it on 1 March 2025 for AUD 500,000. Despite it being under the previous threshold, he must pay **AUD 75,000** (15% of AUD 500,000) at settlement. If he was provided a clearance certificate showing he was non-resident, but failed to provide it in time, his purchaser withholds and remits the amount. Refund possible later, but he must wait and file.
Similarly, Lisa, an Australian resident, selling property must apply early enough for a clearance certificate. If absent, 15% withholding applies even though she is a resident.
## Key Takeaways
- The changes are **in force now**; there is no grace for delay past the deadline.
- Always obtain the clearance certificate early and document residency.
- Buyers and vendors alike must be certain of their obligations—transactions are caught even for low-value or small property due to the removal of thresholds.