Changes to FRCGW start in January

The Foreign resident capital gains withholding (FRCGW) rules are changing for contracts entered into on or after 1 January 2025.

FRCGW applies to all (individual and non-individual) vendors (property sellers) selling or disposing of certain taxable real property (property).

Under the changes:

• the withholding rate will increase from 12.5 per cent to 15 per cent;
• the $750,000 property value threshold will be removed, and the withholding rules will apply to all property sales.

These changes apply after the Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Act 2024 passed in the last Parliamentary sitting week. 

Lexon published a Risk Alert on 9 December about these changes.  The ATO has also published further information. 

Currently, Australian residents selling property must provide a clearance certificate to the purchaser at or before settlement to avoid having 12.5 per cent withheld from a property sale where the value of the property is $750,000 or more. This changes from 1 January 2025. 

All Australian residents selling property will require a clearance certificate from the ATO, or withholding will apply to the transaction.

If an Australian resident vendor doesn’t provide a clearance certificate by settlement, 15 per cent of the sale price must be withheld by the purchaser and paid to the ATO.