Quick Overview

• Withholding Rate Increase: From 12.5% to 15%.
• Threshold Removal: The $750,000 property value threshold will be removed—applies to all property sales.
• Clearance Certificate Required: All sellers must provide a clearance certificate before settlement to avoid withholding.

What’s Changing?

Foreign Resident Capital Gains Withholding (FRCGW) helps the ATO collect tax liabilities owed by non-residents selling Australian properties. Currently, Australian residents selling property valued at $750,000 or more must provide a clearance certificate prior to settlement to avoid having 12.5% withheld.

From 1 January 2025:

The withholding rate will increase from 12.5% to 15%.
The $750,000 threshold will be removed, meaning all property sales will be subject to this requirement.

Why You Need a Clearance Certificate

If you don’t have a valid clearance certificate at settlement, 15% of the sale price will be withheld and paid to the Government. You can only reclaim this amount once your income tax return is processed, potentially delaying access to your funds.

Key Points:

Apply for the clearance certificate as early as possible. Processing can take up to 28 days, though many certificates are issued in just a few days.
Certificates are valid for one year, so you don’t need to wait for a contract or for it to become unconditional.

How to Apply for a Clearance Certificate

• Apply Online: Through the ATO website. Each seller must complete their own application using their full legal name. Supplying your Tax File Number (TFN) or ABN will help process the application faster.
• Changed Your Name? Update your details with the ATO (via myGov) before applying. Follow ATO instructions for changing your name to ensure records match.

Handy Links:

• Foreign Resident Capital Gains Withholding | Australian Taxation Office
• Instructions for Australian Residents on Clearance Certificates

Where to Find Your Certificate:

• Once processed, the ATO will email your clearance certificate to the address provided.
• It will also be available in your myGov account under ATO Online Services → Profile → Communication → History.
• Check your Junk/Spam folder if you don’t see it in your inbox.

Who Can Apply on Your Behalf?

• You or your accountant/tax agent can apply.
• Legally, we cannot apply for you. If you do not have internet access or need assistance, you can make an appointment at our office and we can help guide you through the process.

What If You Don’t Obtain a Clearance Certificate?

If you fail to provide a valid clearance certificate at settlement:

• 15% of the sale price will be withheld and paid to the Government.
• You’ll only receive that amount after your tax return is processed.
• Sellers without a clearance certificate are treated as foreign residents for the purpose of this withholding.

For More Information

• Contact us or the ATO on 13 28 66 (Fast Key Code 4 2) within Australia for further clarification.

Disclaimer:

Some of the above information is sourced directly from the ATO website. While every effort has been made to ensure accuracy, please refer to the ATO for any clarification on these requirements.