CGT Withholding (Foreign Residents)
A 12.5% withholding from the sale price when a foreign resident sells Australian property worth $750,000 or more.
The foreign resident capital gains withholding regime requires purchasers to withhold 12.5% of the purchase price when buying certain taxable Australian property from a foreign resident vendor. This applies to property with a market value of $750,000 or more. The withholding is remitted to the ATO as a prepayment of the vendor's potential CGT liability.
If you are an Australian resident selling property, you should obtain a clearance certificate from the ATO before settlement to confirm you are not a foreign resident. Without a clearance certificate, the purchaser is required to withhold 12.5% regardless of your actual residency status. Clearance certificates are free and usually issued within a few business days when applied for online through the ATO.
Foreign resident vendors can apply for a variation to reduce the withholding amount if their actual CGT liability will be less than 12.5% of the sale price. After lodging their Australian tax return, any excess withholding is refunded. The regime was introduced in 2016 at 10% and increased to 12.5% from 1 July 2017. It applies to all types of real property including residential, commercial, vacant land, and certain mining and pastoral leases.