What foreign resident capital gains withholding is
Foreign resident capital gains withholding (FRCGW) is a federal tax rule administered by the ATO. It is designed to collect capital gains tax from foreign residents who sell Australian property, by requiring the buyer to withhold a portion of the purchase price at settlement and pay it directly to the ATO instead of to the seller.
Why it reaches Australian-resident sellers too
Despite the name, the rule is structured so it applies to a sale unless the seller proves they are an Australian resident for tax purposes. For contracts entered into on or after 1 January 2025 the withholding rate is 15% of the purchase price and there is no minimum price threshold — the old $750,000 threshold and 12.5% rate no longer apply. In practice that means almost every seller now has to deal with it: an Australian-resident seller avoids the withholding only by obtaining an ATO clearance certificate and giving it to the buyer before settlement. Without a valid certificate, the buyer is legally obliged to withhold 15% — money you would otherwise receive at settlement and have to reclaim later through your tax return.
The obligation sits with the buyer
The legal duty to withhold rests with the buyer, not the seller. If a buyer settles without a clearance certificate and fails to withhold the 15%, the ATO can pursue the buyer for the amount — so buyers and their conveyancers treat a valid certificate as a settlement requirement.
The clearance certificate is the key step
- An Australian-resident seller applies to the ATO for a clearance certificate, which confirms residency status and tells the buyer no amount needs to be withheld.
- A certificate is generally valid for 12 months, and it can take time to issue — apply early: the ATO recommends at least 28 days before settlement, as processing can take that long.
- The name on the certificate must match the name on the title exactly, or it can be treated as invalid and hold up settlement.
- Where there are multiple owners on title, each seller generally needs their own certificate.
If you are a genuine foreign resident
If you are a foreign resident and your actual capital gains tax will be less than 15% of the price — for example you are selling at a loss or a small gain — you can apply to the ATO for a variation to reduce the amount withheld before settlement, rather than withholding the full 15% and reclaiming it later.
Get the right advice
FRCGW sits at the intersection of tax and conveyancing, and the consequences of getting it wrong are financial. For your tax position — whether you are a resident, how any capital gain is calculated, and what you can reclaim — speak to your accountant or registered tax agent, or check the ATO directly. Your conveyancer or solicitor handles the settlement side: making sure a valid clearance certificate is in place, or that the correct amount is withheld and remitted if it is not.
If you'd like a conveyancer to manage the clearance certificate and withholding at settlement so nothing is missed, get a quote from Zettle. This is general information for residential sellers in VIC, NSW and QLD, not tax or legal advice; confirm your situation with the ATO or a registered tax agent.
