What is foreign resident capital gains withholding (FRCGW)?
FRCGW sees the Australian Government collect tax from people who are non-residents for tax purposes when they sell properties in Australia. When applicable, the buyer of a property must withhold 15% of their purchase price and pay it to the Australian Taxation Office (ATO), rather than the seller. FRCGW applies to all Australian properties, whether they’re houses, commercial properties, or land.
What is a foreign resident capital gains withholding clearance certificate?
A foreign resident capital gains withholding clearance certificate is a legal document obtained from the ATO that confirms a seller is an Australian resident for tax purposes, making them exempt from FRCGW.
How does a FRCGW clearance certificate work?
Since 2025, all Australian residents for tax purposes have had to obtain an FRCGW clearance certificate when selling Australian property. They must provide it to the buyer before the settlement date and, after doing so, the buyer will not have to withhold 15% of the sale price for FRCGW purposes.
You, your registered tax agent, or legal representative can apply for a clearance certificate via the ATO website. Conveyancers who are not legal practitioners cannot apply on your behalf, but they can assist you with the process. It’s free to apply for a clearance certificate.
It can take up to 28 days for the ATO to provide you with the certificate. If you’re thinking about selling, it’s best to apply for the clearance certificate as soon as possible. The certificate is valid for 12 months from the time of issue and can cover multiple property sales within that period.
If a property is owned by more than one person, each individual will need a clearance certificate of their own.
Who needs a FRCGW clearance certificate?
- Sellers of Australian property who are residents for tax purposes
- Residents for tax purposes who are transferring ownership of an Australian property
- Trusts and super funds (often self-managed super funds) that are Australian residents for tax purposes and are selling Australian property
What types of property and transactions are covered by a FRCGW clearance certificate?
- Your home
- An investment property
- Vacant land
- Commercial property
- Land being used for mining, quarrying, or prospecting
- Indirect interest in Australian property
What happens if you don’t provide a FRCGW clearance certificate?
If you’re an Australian resident for tax purposes selling a property and you fail to obtain a clearance certificate and provide it to the buyer before the settlement date, the buyer must withhold 15% of the sale price and pay it directly to the ATO. It’s then up to you to claim back the FRCGW in your tax return.
Are there exemptions to requiring a FRCGW clearance certificate?
Not every person selling an Australian property will need a FRCGW clearance certificate. If the seller is not a resident for tax purposes, they won’t be able to obtain a FRCGW clearance certificate as they would be subject to FRCGW. That means 15% of their property’s sale price would be withheld by the buyer and provided to the ATO.
There may be certain circumstances where a non-resident could apply for a variation or exemption for their FRCGW obligation, though. These include if they’re making a capital loss on the sale (like if they sell the property for less than they bought it).
What happens if my clearance certificate has a minor name mismatch with the property title?
It’s important that the name on your clearance certificate matches the name on your property title. If there’s a mismatch, the buyer is obligated to withhold the FRCGW on the ATO’s behalf.
Ensure your legal name perfectly matches your tax records and property title before submitting your FRCGW clearance certificate application to avoid processing delays.
What do I need to do if I’m buying a property from a foreign resident for tax purposes?
If you’re purchasing any property, it’s usually a good idea to request a FRCGW clearance certificate from the seller as soon as the property transaction has begun. If they can’t provide you with a certificate, consult your tax agent or legal representative as you could be responsible for providing the FRCGW to the ATO.
As with all property transactions, it’s always best to consult legal and financial professionals early in the process to ensure you comply with the legal requirements of the sale.
