1 January 2025: Changes to Capital Gains Withholding Regime

Effective 1 January 2025, significant changes to the Foreign Resident Capital Gains Withholding (FRCGW) regime impact all property sale contracts entered into on or after this date.

Why the Change?

These changes aim to ensure foreign residents meet their capital gains tax obligations when selling Australian property. Strengthened withholding rules make tax avoidance more difficult, with non-compliance resulting in severe penalties.

Key Changes

  • Increased Withholding Rate: The withholding rate rises from 12.5% to 15% of the sale price.
  • Removal of $750,000 Property Value Threshold: Previously, the FRCGW applied only to property sales exceeding $750,000. Now, it applies to all property sales, regardless of value.

Impact on Vendors

To comply with the new rules:

  • Apply for a Clearance Certificate: Required for all property sales, regardless of value.
  • Provide the Certificate to the Purchaser: If not provided before settlement, the purchaser must withhold 15% of the sale price and remit it to the ATO.

Impact on Purchasers

  • Withhold 15% if No Clearance Certificate is Provided: If the vendor fails to present a clearance certificate before settlement, the purchaser must withhold 15% and remit it to the ATO.

Moving Forward

  • Vendors: Apply for your clearance certificate early to prevent withholding.
  • Purchasers: Ensure you receive the clearance certificate before settlement; otherwise, be prepared to withhold 15%.

Staying informed and proactive will help ensure smooth property transactions in 2025 and beyond. Seek professional advice if needed.

Contact Us

For expert legal guidance, contact M Legal today!

Written by Sarah Mathew on behalf of M Legal’s lawyers.

/by