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The Foreign Resident Capital Gains Withholding (FRCGW) regime must now be considered by all vendors and purchasers in Australia.
What is a FRCGW Clearance Certificate?
If you are a vendor, who is an Australian resident for tax purposes, you may be surprised to hear your solicitor or conveyancer request that you apply for a Foreign Resident Capital Gains Withholding Clearance Certificate. You might ask how this relates to you. It applies to you because you need that Clearance Certificate to avoid having an amount of up to 15% of the sale price, withheld from the sale price by the purchaser and paid direct to the ATO. Without the Clearance Certificate, the purchaser must withhold this amount.
Recent Key Changes to the FRCGW Regime
Significant changes to the Foreign Resident Capital Gains Withholding (FRCGW) regime will take effect for all contracts entered on or after 1 January 2025.
- Increased Withholding Rate: The withholding rate for affected property sales will rise from 12.5% to 15% of the sale price.
- Removal of Property Value Threshold: The existing $750,000 property value threshold will be eliminated, and the withholding requirements will now apply to all property transactions, regardless of the sale price.
Next Steps and Recommendations
Given these impending changes, we strongly recommend that vendors and purchasers:
- Plan ahead: Vendors should apply for clearance certificates as early as possible to prevent settlement delays. Most contract of sales in NSW will require the clearance certificate to be provided to the purchaser at least five (5) business days prior to settlement, and there can be up to a 28 day wait for the certificate to be issued once applied for.
- Seek professional advice: Engage legal and tax professionals to ensure compliance with the new rules.
If PDC can be of any assistance in purchasing a property, contact us today at 4288 0150 or [email protected].
Visit pdclaw.au to learn more about us!
For more information, see the ATO Website!
Skye is a Lawyer with a passion for property and is focused on establishing her career as a subject matter expert in this challenging area of the law. This focus has led Skye to find enjoyment and a passion for all aspects of property transactions and dealings. Skye has strong interpersonal skills and believes in building a long-term relationship with her clients.
