From 1 January 2025, changes to the Foreign Resident Capital Gains Withholding (FRCGW) scheme came into effect in Australia.
Under the FRCGW changes:
- the withholding rate increased from 12.5% to 15% of the value of the property (purchase price); and
- the $750,000 property value threshold was removed, meaning the withholding rules now apply to all sales contracts.
The changes will apply to contracts entered into on and from 1 January 2025.
This means that for all real property transactions, sellers are required to obtain a valid clearance certificate from the Australian Taxation Office (ATO), or withholding will apply. If the property is owned by more than one person, then a valid clearance certificate must be obtained for each seller named on the Certificate of Title.
Without a valid clearance certificate being obtained and supplied to the buyer/buyer’s representative, 15% of the purchase price of the property, or an ATO approved varied amount (subject to the seller obtaining a valid variation certificate), must be withheld by the buyer/buyer’s representative and paid to the ATO at settlement.
As the $750,000 property value threshold has been removed, there is no need for a seller to wait to enter into a sales contract before applying to the ATO for the clearance certificate, as a clearance certificate is valid for 12 months.
Note: The above is a summary for general information purposes only. It is not intended to be comprehensive or constitute legal advice. You should seek formal legal or other professional advice in relation to your particular circumstances before relying on the content of this article.
Authors:
Peter Broun (Director: Property & Real Estate)
Elisia Giardina (Senior Associate: Property & Real Estate)
Directors:
Jason De Silva (Director: Business Advisory, Insolvency & Litigation)
Kelly Parker (Director: Business Advisory, Commercial & Insolvency)
Peter Broun (Director: Property & Real Estate)
Murfett Legal is a leading law firm in WA, providing services in litigation, corporate and commercial, employment and workplace relations, insolvency, debt collection, business restructuring, Wills & estates, property, leasing, settlements, liquor licensing and intellectual property.
