Important Updates to Australia's Property Withholding Rules

Effective 1 January 2025, significant amendments to the Foreign Resident Capital Gains Withholding (FRCGW) regulations will come into force, impacting both Australian and foreign residents engaged in property transactions.

Key Changes:

• The withholding rate will increase from 12.5% to 15%.

• The $750,000 property value threshold will be removed, meaning the withholding rules will now apply to all property sales, regardless of value.

• The Foreign resident capital gains withholding (FRCGW) rules are changing from 1 January 2025..

Implications for Australian Residents Selling Property:

To avoid withholding, Australian resident vendors must obtain and provide a clearance certificate issued by the Australian Taxation Office (ATO) to the purchaser before or at the time of settlement. Failure to do so will result in 15% of the sale price being withheld and remitted to the ATO.

If withholding occurs, the vendor may claim any excess amount as a refund, which will be processed following the lodgment of their next income tax return.

Clearance Certificate Application Process:

• Most clearance certificates are issued within a few days, but certain cases may require up to 28 days for processing.

• Certificates remain valid for 12 months, allowing vendors to apply in advance before entering into a contract.

Considerations for Foreign Resident Vendors:

Foreign residents selling Australian property may have the option to apply for a variation of the withholding rate, subject to ATO approval.

These regulatory adjustments are designed to enhance tax compliance and streamline the collection of tax liabilities from non-resident property sellers. To ensure a smooth transaction process, both buyers and sellers are encouraged to familiarize themselves with these new requirements and seek professional advice if necessary.

Contact Gordon Q.C Du& Associates

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