Recently, the Australian Government made changes relating to the Foreign Resident Capital Gains Withholding (FRCGW), which was implemented on 1 January 2025. Whether you are buying or selling property in Australia, it is essential to understand how the updated rules may affect you.
What has changed?
Prior to 1 January 2025, if a property was sold for $750,000 or more, the seller(s) had to provide a clearance certificate issued by the Australian Tax Office (ATO) to the buyer(s) before the settlement date. Otherwise, 12.5% of the purchase price would be withheld at settlement and paid to the ATO. This is designed to ensure that foreign residents meet their Australian capital gains tax obligations.
Since 1 January 2025, this rule has changed. The withholding rate has increased from 12.5% to 15%, and the property value threshold has been removed. This means that the FRCGW now applies to all property sales, regardless of its value.
What does this mean for you?
If you are selling real property in Australia, unless you provide a valid clearance certificate issued by the ATO, the buyer is required to withhold 15% of the purchase price at settlement and pay that amount directly to the ATO.
More importantly, where a property has more than one registered owner, each seller must obtain their own clearance certificate. If one seller fails to obtain a certificate, 15% will be withheld in respect of that seller’s share.
If you are a buyer who intends to purchase real property in Australia, and the seller does not provide a valid clearance certificate before settlement:
- You are legally required to withhold 15% of the purchase price; and
- You must remit that amount directly to the ATO on or before the settlement date
Failure to comply can result in penalties, as you would become liable for the withheld amount.
How do you obtain a clearance certificate?
You can apply for a clearance certificate directly through the ATO website. For most Australian tax residents, this process is relatively simple. However, delays may arise if:
- You have outstanding tax returns
- You haven’t filed your taxes for some time
- You have been absent from Australia for an extended period
If this is the case, we suggest that you consult with your accountant on the matter so they can assist you with the clearance certificate application process.
How can W & G Lawyers support you?
The recent changes to the Foreign Resident Capital Gains Withholding (FRCGW) rules can significantly affect both buyers and sellers. Early legal guidance is essential to avoid unexpected financial impact, settlement delays, or compliance risks.
At W & G Lawyers, we provide practical and transaction-focused assistance, including:
- Assessing whether a clearance certificate or variation application is required.
- Reviewing ownership structures (including joint owners, trusts, and companies) to determine individual obligations.
- Liaising with your accountant to address outstanding tax matters that may delay clearance.
- Advising buyers on their legal obligation to withhold and remit 15% where applicable.
- Calculating the correct withholding amount for each seller’s share.
- Preparing and lodging required ATO forms prior to settlement.
- Coordinating settlement to ensure compliance and minimise risk of penalties.
- Providing strategic advice to protect your cash flow and legal position.
Whether you are buying or selling property in Australia, we ensure your transaction proceeds smoothly and in full compliance with the updated legislation.
Visit or Contact Us
📍 68 Bryants Road, Shailer Park QLD 4128
📞 (07) 2810 5666
🌐 www.wglawyers.com.au
✉ info@wglawyers.com.au
Resources
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-resident-capital-gains-withholding-overview
https://www.ato.gov.au/other-languages/information-in-other-languages/general/selling-and-purchasing-property-capital-gains-withholding
Disclaimer
The article published by W & G Lawyers is intended to provide general information only and does not constitute legal advice on any subject matter. By accessing or reading this article, the reader acknowledges that no solicitor–client relationship is created between the reader and W & G Lawyers.
The content should not be relied upon as a substitute for obtaining legal advice from a qualified legal practitioner. Readers are encouraged to engage a lawyer to obtain advice tailored to their specific circumstances. You may contact our office or locate a solicitor through the Queensland Law Society online directory at https://www.youandthelaw.com.au/directory
This article does not take into account all potential future legislative amendments, regulatory changes, or developments in case law. Accordingly, the content may not reflect subsequent changes in the law and should not be relied upon as legal advice for any particular situation.
This article will not be updated after publication. Any subsequent developments in the law or legislative changes may be addressed in separate future publications.