CGT Withholding (Foreign Residents)

The foreign resident capital gains withholding (FRCGW) regime requires purchasers to withhold 15% of the purchase price when buying certain taxable Australian property from a foreign resident vendor. Since 1 January 2025 there is no minimum property value threshold — withholding applies to all contracts entered from that date regardless of price (previously it only applied to property worth $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. Since 1 January 2025, Australian residents need a clearance certificate for all property contracts regardless of sale price. Without a clearance certificate, the purchaser is required to withhold 15% 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 15% of the sale price. After lodging their Australian tax return, any excess withholding is refunded. The regime was introduced in 2016 at 10%, increased to 12.5% from 1 July 2017, and increased again to 15% (with the value threshold removed) from 1 January 2025. It applies to all types of real property including residential, commercial, vacant land, and certain mining and pastoral leases.