Foreign resident capital gains withholding overview

Foreign resident capital gains withholding (FRCGW) must be applied on all real property (property) sales, unless the vendor is:

• an Australian resident for tax purposes (Australian resident) with a valid clearance certificate issued by us at, or before settlement – without a clearance certificate, FRCGW must be withheld from the sale proceeds by the purchaser and paid to us
• a foreign resident (also known as a non-resident) with a variation notice specifying a reduced rate of FRCGW – without a variation, the purchaser must withhold the full rate of FRCGW from the sale price and remit that amount to us to go toward payment of this liability.

Purchasers must pay any amount they withhold to us at, or before settlement.

The most common reasons for disposing of a property include selling and transferring to another person or entity. For more reasons see CGT events.

For a summary of what to do:

• visit the ATO Publication Ordering Service to download our Selling and purchasing property – capital gains withholdingExternal Link factsheet
• see the factsheet in Chinese.

Rate of withholding from a property sale

The following FRCGW rates apply to the market value of property contracts signed:

• Up to and including 31 December 2024, a rate of 12.5% applies to property valued at $750,000 or more.
• On and after 1 January 2025, a rate of 15% applies to the value of all property.

Australian residency

Depending on circumstances, residency for tax purposes can change. We will confirm your residency status for foreign capital gains withholding when you apply for a clearance certificate.

Individuals

The residency test for individuals for tax purposes is different to that for social security and immigration purposes.

Generally, an individual will be an Australian resident for tax purposes if they:

• have always lived in Australia, or came to Australia and live here permanently
• have been in Australia continuously for 6 months or more, and for most of that time worked in one job and lived at the same place
• have been in Australia for more than 6 months of the year, unless their usual home is overseas and they don't intend to live in Australia
• go overseas temporarily and don't set up a permanent home in another country
• are an overseas student who came to Australia to study and are enrolled in a course that is more than 6 months.

You can work out your tax residency or work out your residency status for tax purposes.

Non-individuals

Different residency tests apply to non-individual entities such as companies, corporate limited partnerships and trusts.

Non-individuals can refer to Working out your residency.

Types of assets

Taxable Australian real property requiring a clearance certificate include:

• your home
• vacant land, buildings, residential and commercial property
• mining, quarrying or prospecting rights where they are situated in Australia
• a lease over real property in Australia
• indirect Australian real property (IARP) interests, where the holder has a right to occupy land or buildings on land.

Other assets

Other types of real property-related assets, such as leases, shares that are indirect real property interests (IARPI) and options in those that aren't listed on an official stock exchange are also subject to FRCGW.

See Vendor declarations for more info about what to do.

Excluded transactions

Some transactions (due to the way they are sold or disposed of) aren't subject to FRCGW, including:

• transactions through an approved stock exchange (such as the Australian Stock Exchange) or those using a broker-operated crossing system
• transactions subject to another withholding obligation, see List of CGT assets and exemptions
• securities lending arrangements, as these don't cause a CGT liability
• transactions when a vendor is in external administration, or transactions from a bankrupt estate, a composition or scheme of arrangement, a debt agreement, a personal insolvency agreement, or same or similar circumstances under a foreign law.

Market value

Usually, the market value of property is the sale price. However, if the sale price has been negotiated between the vendor and the purchaser:

• at arm’s length we accept the sale price as the market value. This is the sale price before adjustments for disbursements at settlement. For example, council rates, water and sewer charges and strata levies.
• at non-arm's length, this is when the market value is different to the sale price. For example, the vendor and purchaser are related (non-arm's length), the purchaser must seek a separate expert evaluation from a professional valuer.