The foreign resident capital gains withholding regime used to be a problem for high-value sales only. Since 1 January 2025 the rate is 15% and the $750,000 threshold is gone, so every Australian-resident vendor now needs an ATO clearance certificate, or 15% of the price is withheld at settlement. A short, practical briefing on the one piece of paperwork no vendor can skip.
Foreign resident capital gains withholding (FRCGW) is a federal regime, administered by the ATO, but it lands at every NSW settlement. The mechanism is blunt: on the sale of Australian real property, the purchaser must withhold a percentage of the price and remit it to the ATO, unless the vendor produces a clearance certificate confirming they are an Australian resident for tax purposes. It was designed to capture tax from foreign vendors. In practice, it now reaches everyone.
What changed on 1 January 2025
Two changes took the regime from niche to universal. The withholding rate rose from 12.5% to 15%, and, more significantly, the $750,000 price threshold was removed entirely. Previously, only sales at or above $750,000 were caught, which excluded a large share of the market. With no threshold, FRCGW now applies to the sale of any Australian real property regardless of value.
What a vendor needs to do
- Apply to the ATO for a clearance certificate as early as possible, ideally when the property is listed, not in the week before settlement.
- Allow processing time. Many certificates issue quickly, but some take days to weeks where the ATO's records require checking.
- Give the certificate to the purchaser before settlement. The name on the certificate must match the vendor on the contract exactly.
- Where there are multiple vendors, each needs their own certificate. One missing certificate means withholding on that vendor's share.
The certificate is free, valid for 12 months, and almost always straightforward for an Australian-resident seller. The cost of forgetting it is not the tax (that is reconciled eventually) but the cash-flow hit of having 15% of the sale price held back at the moment a vendor usually needs it most. On every sale we act on, the clearance certificate is on the opening checklist, so it is in hand well before settlement day.
On a matter related to this?
The general information in this briefing isn't a substitute for advice tailored to your circumstances. If you're working on a conveyancing matter and want a partner's view, get in touch.