Recent legislation changes to the Foreign Resident Capital Gains Withholding (FRCGW) regime will take effect on 1 January 2025.
The current situation requires Australian residents selling property to obtain a Clearance Certificate and provide this to the Purchaser at or before Settlement to avoid having 12.5% of the sale price withheld in relation to properties valued at $750,000 or more.
Under the new FRCGW changes:
Withholding Rate Increase: The withholding rate will increase from 12.5% to 15%.
Threshold Removal: The $750,000 property value threshold will be removed, making the withholding rules applicable to all property sales.
These changes will apply to Contracts of Sale entered on or after 1 January 2025.
What do these changes mean to you?
All Australian residents selling property must obtain a Clearance Certificate from the Australian Taxation Office (ATO) to avoid withholding. If a Clearance Certificate is not provided by Settlement, the Purchaser is required to withhold 15% of the sale price and remit this to the ATO. If an amount is withheld, the Vendor will only receive any refund due after their next income tax return is processed.
Applying for a Clearance Certificate:
Clearance Certificates are valid for up to 12 months, allowing Vendors to obtain them early. It is important to apply early. While most Clearance Certificates are issued within a few days, some can take up to 28 days.
Please contact us on 1300 022 267 if you require assistance with completing your application and obtaining your Clearance Certificate.