Navigating Australian tax on property sales can be tricky, especially if you’re an expat or foreign resident. FRCGW applies to all property transactions (as of January 1st 2025) real property or interests in Australian land and requires proof of residency status.

At GM Tax & Accounting, we specialise in expat tax services and advice across Australia and the UK, helping clients like you avoid traps and stay compliant.

Whether you’re selling a home down under or managing investments from overseas, it’s important for both sellers and buyers to clearly state their intentions on property transactions and FRCGW compliance.

Let’s break it down simply.

What Is Foreign Resident Capital Gains Withholding (FRCGW)?

FRCGW is a tax mechanism to ensure foreign residents pay capital gains tax on Australian real property sales. It applies to all disposals of real property and is taxable on sellers who are not Australian tax residents at the time of settlement, including deceased estates, trusts and partnerships.

Transfer of property ownership triggers FRCGW obligations. The withholding rate is 15% of the purchase price, which the buyer must pay to the Australian Taxation Office (ATO) unless exemptions apply. Buyers who fail to withhold the required amount from the purchase price may face penalties and interest charges.

If the required clearance certificate is not provided by the seller, the buyer must withhold the required amount. The withheld amount is taken from the sale proceeds. This allows the ATO to collect tax upfront from non-residents who might otherwise leave the country without paying their tax.

Important: New rules from 2025 see the following changes to the market value of property contracts. The changes to the FRCGW rules were made pursuant to the Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Act 2024.

Up to and including 31 December 2024, a rate of 12.5% applies to property valued at $750,000 or more.
On and after 1 January 2025, a rate of 15% applies to the value of all property.

If you have rented the property at any time, either before it was your main residence or after you may be eligible for partial exemptions.

Capital gains tax (and related deductions) only applies to the rental periods, not when it was your home. We see this often with expats who’ve relocated temporarily, so worth reviewing your situation.

What Is a FRCGW Clearance Certificate?

A clearance certificate from the ATO, also known as an ATO clearance certificate, is the buyer’s ticket to avoiding the 15% withholding. Sellers must provide ATO clearance certificates to buyers to avoid tax being withheld, confirming the seller is an Australian resident for tax purposes or the transaction doesn’t trigger FRCGW.

Get it early for compliance with ATO regulations and to facilitate a smooth transaction on settlement date.

Without this certificate, the buyer is legally required to withhold and pay 15% of the purchase price to the ATO at settlement. It’s the seller’s (vendor’s) responsibility to get and provide the certificate to the buyer before or at settlement.

This gives peace of mind for everyone involved, especially in high value deals. For expats, getting this sorted early prevents delays and smooth transactions across borders.

How to Apply

Easy and online via the ATO’s portal.

Australian residents (or their representatives) can apply here: ATO FRCGW Clearance Certificate Application. Even if you’re an Australian resident who doesn’t lodge tax returns like aged pensioners you’ll still need to apply. Foreign residents aren’t eligible for a clearance certificate but may qualify for a variation (more below).

Applications are processed by the ATO and using a registered tax agent can help ensure your application is correct and avoid delays. If you’re unsure about eligibility or need help with the application, a tax agent like our team at GM Tax & Accounting can assist you throughout the process.

We’ve dealt with many cases for clients in Australia and the UK.

Important Dates and Deadlines for FRCGW Compliance

With the changes to FRCGW rules from 1 January 2025, sellers need to be aware of the new requirements and deadlines.

All property contracts signed on or after 1 January 2025 are subject to the new rules which include a higher withholding rate of 15% and removal of the previous $750,000 property value threshold.

Sellers must get an ATO clearance certificate before settlement and provide it to the purchaser to avoid withholding. The ATO recommends applying for a clearance certificate as early as possible in the property sale process to avoid delays. The deadline for providing the clearance certificate is settlement date, failure to do so means the purchaser must withhold 15% of the purchase price and pay it to the ATO.

If funds are withheld, sellers can only get the amount back after lodging their income tax return for the relevant financial year. To avoid delays in getting your sale proceeds and to ensure a smooth settlement process, it’s essential to get and provide the clearance certificate on time.

Stay informed about these important dates and compliance requirements to navigate your property transaction with confidence.

Can I Apply for a Variation to the Withholding Rate?

Vendors can apply for a variation where:

They are not entitled to a clearance certificate
a vendor’s declaration is not appropriate
15% withholding is too high compared to the actual Australian tax liability on the sale of the asset.

Reasons for a variation include:

the vendor will not make a capital gain on the transaction (for example, because they will make a capital loss or a CGT roll-over applies)
the vendor will not have an income tax liability (for example, because of carried-forward capital losses or tax losses)
a creditor of the vendor has a mortgage or other security interest over the property, and the proceeds of sale available at settlement are insufficient to cover both the amount to be withheld and to discharge the debt the property secures
a creditor acquires legal title to the property (that is, becomes the purchaser) as a result of an order for foreclosure, and its security would be further diminished as a result of having to comply with the withholding obligation.

If you need help or guidance with applying for a variation, please contact us.

Get In Touch

Looking for FRCGW Support?

FRCGW isn’t just about compliance; it’s about protecting your financial outcomes.

Our expat tax experts can review your property history, apply for certificates or variations on your behalf and integrate this into your overall tax strategy.

With offices in Australia and the UK, we make it hassle-free.

FRCGW Certificate: A Guide on Foreign Resident Capital Gains Withholding