There have been recent changes to the Foreign Resident Capital Gains Withholding (FRCGW).
The FRCGW is a tax which was created to support the collection of tax liabilities owed by non-residents selling Australian property.
Under the changes, the withholding rate has increased from 12.5% to 15% and the $750,000.00 property value threshold has been removed and therefore withholding rules will apply to all property sales.
As of 1 January 2025 all vendors will be required to apply for a Clearance Certificate from the ATO to avoid having 15% of the sale price withheld from their property proceeds. You can apply for the certificate on the ATO website. Please make sure you have your Tax File Number available when completing the application.
Clearance certificates will normally issue within a few days, but you should apply for the certificate early as they can sometimes take up to 28 days to issue and the certificate will be required before the settlement date.
As a vendor, you should apply for the clearance certificate as soon as possible following the execution of the contract for sale, or even prior to signing a contract. The certificate is valid for 12 months regardless of whether you go ahead with the sale.
If you do not receive a clearance certificate prior to the settlement date, the purchaser is required to withhold 15% of the sale price and remit this amount to the ATO at settlement. You will not receive a refund of this amount until your next income tax return is processed.
For any information or assistance, please contact either Paige Day or Helen Nevin on (08) 8357 7611 or get in touch online.