Significant Changes to Foreign Resident Capital Gains Withholding (FRCGW)
Posted on June 25th, 2025 by WLF
Written By Aneesh Chopra – Accountant
As we approach 30 June 2025, it’s important to be aware of significant changes to the Foreign Resident Capital Gains Withholding (FRCGW) regime that took effect on 1 January 2025.
At WLF, we are dedicated to keeping you informed and prepared for these updates.
Overview of FRCGW
Since 1 July 2016 the FRCGW regime has required purchasers of certain Australian real property and related interests to withhold an amount from the proceeds and remit it to the ATO when the property is acquired from a foreign resident vendor. This withheld amount is not a final tax; the vendor can claim a credit for any amounts withheld when lodging their income tax return.
Up to and including 31 December 2024 a withholding rate of 12.5% applied to property valued at $750,000 or more.
What’s New?
Starting 1 January 2025 the FRCGW regime has been expanded. It now applies to all vendors (both individual and non-individual), including Australian residents, selling or disposing of certain taxable real property.
What is Considered Taxable Real Property?
The ATO recognises the following assets as taxable Australian real property, which will require a clearance certificate:
- Vacant land, buildings, residential, and commercial property
- Mining, quarrying, or prospecting rights situated in Australia
- A lease over real property in Australia
- Indirect Australian real property (IARP) interests, where the holder has a right to occupy land or buildings on land
What This Means for You
All Australian residents selling property will now require a clearance certificate from the ATO, or withholding will apply to the transaction. If an Australian resident vendor doesn’t provide a clearance certificate by settlement, 15% of the sale price must be withheld by the purchaser and paid to the ATO.
If part of the sale price is withheld, the seller will only receive any refund they’re entitled to after they lodge their next income tax return, and it has been processed by the ATO.
Importance of Applying for the Clearance Certificate Early
Most clearance certificates are issued within a few days, but it’s important to apply early as some can take up to 28 days to issue.
The certificates are valid for 12 months, so as soon as you decide to sell you should consider obtaining one, so that the sale process isn’t slowed down. You can apply for the certificate here Foreign Resident Capital Gains Withholding | Australian Taxation Office
New Rate of Withholding (From 1 January 2025):
- For contracts entered into on or after 1 January 2025, a rate of 15% applies to the value of all property an increase from 12.5%.
- The $750,000 property value threshold will be removed, and the withholding rules will apply to all property sales.
How WLF Can Help
At WLF, we are committed to helping you navigate these changes smoothly. Our team of experts is here to assist you and ensuring compliance with the new FRCGW requirements. Contact us today to learn more about how we can support you through these updates.
Disclaimer
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, WLF Accounting & Advisory and its related entities, does not accept any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any tax considerations outlined in this publication are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. You should seek specific tax advice from us as your registered tax agent or registered tax (financial) adviser.
