The Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Bill has amended how the foreign resident capital gains withholding (FRCGW) regime applies to sale contracts entered into from 1 January 2025.
All Australian residents looking to sell real property will be impacted by the new changes to the FRCGW regime.
If you’re an Australian resident looking to sell real property, it’s essential to understand how these changes might affect you.
Key Changes Sellers Need to Know
The key changes to the FRCGW Regime include:
- Increase in the withholding rate from 12.5% to 15% of the sale price; and
- No more $750,000.00 threshold: Previously, the FRCGW Regime only applied to sales above $750,000. Under the new rules, a Clearance Certificate will be required for all property sales, regardless of the price.
These changes mean that from 1 January 2025, every seller of Australian property will need to secure a Clearance Certificate from the Australian Taxation Office (ATO) before settlement. Without this certificate, the buyer will be required to withhold 15% of the sale proceeds and remit this amount directly to the ATO.
What should Sellers do?
To avoid the withholding obligations, all sellers of real property should either:
- attach a clearance certificate to the relevant contract of sale; or
- provide the buyer with a clearance certificate prior to settlement.
Australian residents selling property can apply for a clearance certificate free of charge from the ATO.
It is important to act early, as processing times can range from a few days to up to 28 days. Clearance certificates are valid for 12 months from the date of issue, so it’s wise to apply as soon as you consider selling – you do not need to wait until you sign a contract to apply for a clearance certificate.
You can apply for a clearance certificate at this link https://www.ato.gov.au/single-page-applications/frwt-certificate.
Are there Exemptions?
In some cases, sellers may be exempt from the requirement to obtain a clearance certificate.
We recommend seeking legal advice to see if any exemptions apply to your property transaction.
Assistance from Keir Steele Waldon Lawyers
The changes to the FRCGW regime could impact the timing and structure of your sale. If you have any questions or need guidance on how these amendments may affect you, our friendly and professional team is here to help.
Contact us today for expert advice tailored to your situation.
