Significant changes to the Foreign Resident Capital Gains Withholding (FRCGW) regime will take effect on 1 January 2025.
At present, Australian residents selling property must provide a Clearance Certificate to the Purchaser at or before Settlement to avoid having 12.5% of the sale price withheld, applicable to properties valued at $750,000 or more.
Under the new FRCGW changes:
- Withholding Rate Increase: The withholding rate will increase from 12.5% to 15%.
- Threshold Removal: The $750,000 property value threshold will be removed, making the withholding rules applicable to all property sales.
These changes will apply to Contracts of Sale entered into on or after 1 January 2025.
What do these changes mean?
All Australian residents selling property must obtain a Clearance Certificate from the Australian Taxation Office (ATO) to avoid withholding. If a Clearance Certificate is not provided by Settlement, the Purchaser is required to withhold 15% of the sale price and remit it to the ATO. If an amount is withheld, the Vendor will only receive any refund due after their next income tax return is processed.
Applying for a Clearance Certificate:
Clearance Certificates are valid for up to 12 months, allowing Vendors to obtain them early. It is important to apply early, as whilst most Clearance Certificates are issued within a few days, some can take up to 28 days.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
