What foreign resident capital gains withholding is
Foreign resident capital gains withholding (FRCGW) is a federal tax rule administered by the ATO. It's 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 matters even if you're an Australian resident
Despite the name, the rule is structured so it can apply to a sale unless the seller proves they are an Australian resident for tax purposes. Australian-resident sellers avoid the withholding by obtaining an ATO clearance certificate and giving it to the buyer before settlement. Without a valid clearance certificate, the buyer is legally obliged to withhold the set percentage: money you would otherwise receive at settlement and have to reclaim later through your tax return.
[VERIFY: current rate, threshold, and whether it applies to all sellers — reported changes; confirm all] The withholding rate and the property-value threshold that triggers FRCGW have been the subject of reported changes. Do not rely on any single figure: confirm the current rate, the current threshold (including whether a threshold still applies at all), and exactly which sellers the rule now captures, against the ATO's current guidance before publishing.
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.
- The certificate can take time to issue, so apply for it early in the sale — not in the final days before settlement.
- Where there are multiple owners on title, each seller generally needs their own certificate.
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're 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 isn't.
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.