The Foreign Resident Capital Gains Withholding (FRCGW) rules will change from 1 January 2025. Currently, Australian residents selling property valued at $750,000 or more must provide a clearance certificate to avoid a 12.5% withholding from the sale. However, the new rules will:

• Increase the withholding rate from 12.5% to 15%
• Remove the $750,000 threshold, applying the rules to all property sales

From January 2025, Australian residents must provide a clearance certificate from the ATO before settlement, or the purchaser must withhold 15% of the sale price. If the withholding occurs, the vendor can only receive a refund after their income tax return is processed. Clearance certificates are generally issued within a few days but can take up to 28 days, and they are valid for 12 months.

Foreign residents may apply to vary the withholding rate. It is important for those involved in property transactions to be aware of these changes and assist clients accordingly.

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