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Changes to Foreign Resident Capital Gains Withholding (FRCGW)

Ron Zucker, Eollyn Cortes, Sagang Chung and Julia Zou
2 min read

What is the FRCGW Tax Regime?


The Foreign Resident Capital Gains Withholding (FRCGW) Tax Regime was introduced on 1 July 2016 and applies to sellers disposing of specific taxable property. Currently, the withholding tax rate is 12.5% and applies to property sales with a contract price of $750,000.00 or more.


This regime aims to ensure foreign residents meet their tax obligations. However, it also affects Australian residents, who must provide a clearance certificate confirming that tax withholding is not required. If a seller does not provide this certificate, the buyer is required to withhold 12.5% of the purchase price and remit it to the Australian Taxation Office (ATO).



Changes to the FRCGW Tax Regime


The Treasury Law Amendment (2024 Tax and Other Measures No.1) Bill, passed on 28 November 2024, will make changes to the FRCGW Tax Regime for contracts entered into from 1 January 2025. The key amendments include:


  • Raising the withholding tax rate from 12.5% to 15%.

  • Removing the $750,000.00 threshold, applying the withholding rules to all property sales regardless of price.


Applications for Clearance certificates


Clearance certificates are valid for 12 months and can be issued within a few days, but it is advisable to apply early as processing may take up to 28 days. If a clearance certificate is to be obtained for a sale, each seller must separately obtain a clearance certificate and provide this to the buyer prior to settlement.


There is no fee for a clearance certificate and sellers can apply for a certificate before signing a contract. If a seller requires a short settlement, it is recommended that the application for the clearance certificate be lodged before the exchange of contracts.


Key Takeaways


Australian residents selling property must secure a clearance certificate from the ATO regardless of the transaction amount, to avoid withholding. If withholding occurs, the seller will only receive any eligible refund after filing their next tax return.


For further information on how the changes to FRCGW Tax Regime may impact you, please contact one of our people.


Ron Zucker 0410 590 111

Eollyn Cortes 0478 727 395

Sagang Chung 0431 435 333

Julia Zou 0426 670 202

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