Starting January 1, 2025, significant changes will come into effect under Australia’s Foreign Capital Gains Withholding (FCGW) legislation. These amendments will impact all property transactions involving sellers, regardless of whether they are Australian residents or foreign investors. If you’re planning to buy or sell property in Brisbane or elsewhere in Australia, it’s critical to understand how these changes could affect your next transaction.
Key Changes to the Legislation
The following table highlights the differences between the current regime and the new regime from January 1, 2025:
| Current Regime | New Regime (from 1 Jan 2025) |
|---|---|
| Withholding rate: 12.5% | Withholding rate increases to 15% |
| No withholding required if market value < $750,000 | Withholding applies regardless of market value |
Under the updated legislation, all sellers must provide a “Foreign Capital Gains Clearance Certificate” (FCC) to prove their Australian residency status. Without this certificate, buyers’ lawyers will be required to withhold 15% of the property’s contract price at settlement. The removal of the $750,000 exemption threshold means this legislation now applies to all property transactions.
How Does This Affect You?
For Sellers:
- Obtain the Clearance Certificate: Australian residents must apply for a Foreign Capital Gains Clearance Certificate through the ATO before selling a property. The certificate confirms that you are not subject to the withholding tax.
- Plan Early: Obtaining the certificate can take time. Sellers are encouraged to start the application process well in advance of settlement.
For Buyers:
- Responsibility to Withhold: If the seller does not provide the clearance certificate, your lawyer must withhold 15% of the purchase price and remit it to the ATO. Failing to do so may leave you liable for the amount.
- Legal Guidance: Ensure your lawyer or conveyancer checks for the seller’s certificate early in the process to avoid settlement delays.
What Happens If the Certificate Is Missing?
If a seller cannot provide the certificate by the time of settlement:
- The buyer’s lawyer is legally obligated to retain 15% of the contract price.
- This amount is submitted to the ATO as part of the Foreign Capital Gains Withholding regime.
Sellers who believe the withholding is unnecessary (e.g., Australian residents who couldn’t secure the certificate in time) may later claim a refund or adjustment directly from the ATO. However, this process can take time and may result in financial inconvenience.
Steps to Take
- Sellers:
- Apply for your clearance certificate as soon as you decide to sell your property.
- Consult with a property lawyer to navigate the application process efficiently.
- Buyers:
- Engage a property lawyer familiar with the Foreign Capital Gains Withholding rules.
- Verify that the seller has obtained their clearance certificate well before the settlement date.
- Both Parties:
- Communicate with your legal representatives to ensure compliance with the new requirements and avoid unnecessary penalties or delays.
Need Help Navigating These Changes?
At Ensure Legal, our team of experienced Brisbane property lawyers is here to guide you through the complexities of property transactions, including the updated Foreign Capital Gains Withholding legislation. Whether you’re buying or selling, we can help ensure a smooth and compliant settlement process.
📞 Contact us today for a consultation, and let us take care of the legal details so you can focus on your property goals.
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