What Is Foreign Resident Capital Gains Withholding?
FRCGW is a legal obligation for purchasers to withhold a portion of the purchase price and remit it to the Australian Taxation Office (ATO) when acquiring certain types of property from foreign residents.
This applies unless:
- The vendor is an Australian resident and provides a valid clearance certificate, or
- The vendor is a foreign resident who provides a variation notice allowing a lower withholding rate.
Failing to meet these conditions means the buyer must withhold the full rate and pay it directly to the ATO at or before settlement.
2025 Update: New FRCGW Withholding Rate
As of 1 January 2025, the withholding rate increased from 12.5% to 15%. This applies to all real property transactions, regardless of value.
| Contract Date | Property Value | FRCGW Rate |
|---|---|---|
| On or before 31 Dec 2024 | $750,000 or more | 12.5% |
| On or after 1 Jan 2025 | Any value | 15% |
📌 Example:
If a foreign resident vendor signs a contract on 2 January 2025 to sell a property for $1.2 million, the buyer must withhold $180,000 (15%) and pay it to the ATO.
Who Is Considered a Foreign Resident for Tax Purposes?
Your immigration status does not necessarily determine your tax residency.
The ATO uses different criteria, such as:
- How long you’ve lived in Australia
- Whether your permanent home is overseas
- Whether you’re a student or have left Australia temporarily
Even companies, trusts, and partnerships must undergo specific residency tests.
📝 Tip: Vendors unsure of their status should apply for a Clearance Certificate or variation notice through the ATO well in advance of settlement.
What Types of Property Are Covered?
FRCGW applies to Taxable Australian Real Property (TARP), including:
- Residential homes and apartments
- Commercial and industrial real estate
- Vacant land
- Mining or resource rights
- Leases over land
- Indirect Australian real property interests, such as shares in companies that own real estate
What If the Vendor Doesn’t Provide a Clearance Certificate?
If the vendor is unable or unwilling to provide a clearance certificate before settlement, the purchaser is legally required to:
- Withhold 15% of the purchase price
- Pay it directly to the ATO
- Ensure compliance to avoid penalties or delays in settlement
What Is the “Market Value” of the Property?
Normally, the market value is the sale price as listed in the contract. However:
- If the transaction is between related parties (non-arm’s length), an independent property valuation may be required.
- The ATO may not accept the sale price as market value unless negotiated at arm’s length.
Are Any Transactions Exempt?
Yes, certain transactions are excluded from the FRCGW regime, such as:
- Sales conducted through an approved stock exchange
- Sales involving vendors under external administration or bankruptcy
- Securities lending arrangements
- CGT-exempt transfers such as certain deceased estates
Ensure Legal can help you determine if your transaction qualifies for an exemption.
How We Can Help at Ensure Legal
As experienced Queensland property lawyers, we regularly assist buyers, sellers, and agents with:
✅ Determining FRCGW applicability
✅ Applying for clearance certificates and variation notices
✅ Ensuring compliance at settlement
✅ Reviewing contracts to identify tax risks
✅ Liaising with your accountant or the ATO as needed
📞 Need advice on your next property transaction?
Contact us today for clear legal guidance on FRCGW and Queensland conveyancing.
