Foreign Resident Capital Gains Withholding (FRCGW) changed on 1 January 2025.
Under the new FRCGW changes:
- The withholding rate will increase from 12.5% to 15%, and
- The $750,000 property value threshold will be removed, and the withholding rules will apply to all property transfers (no matter what the value).
This means that for all real property transactions (sales of property), all vendors are required to supply a valid clearance certificate from the Australian Taxation Office (ATO) or withholding (holding back of monies to pay to the ATO) will apply.
Without a valid clearance certificate at or before settlement, 15% of the market value of the property (typically the purchase price) or an ATO-approved varied amount must be withheld by the purchaser (from the purchase monies) and paid to the ATO at settlement.
Foreign resident vendors may continue to apply to vary the withholding rate.
The FRCGW changes are made pursuant to the Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Act 2024 (Cth).
The changes will apply to all sale contracts entered into, on or after 1 January 2025.
