Foreign residents and variations

Foreign residents are subject to FRCGW when selling Australian real property.

Published 19 December 2024

Foreign residents selling Australian property

Foreign residents (also known as non-individuals) are subject to the full rate of foreign resident capital gains withholding (FRCGW).

FRCGW is applied to the sale price (or market value if non-arm's length) when selling Australian real property (property), unless there is a variation notice that reduces the rate.

A foreign resident may claim a credit for the withheld FRCGW by declaring the capital gain (or loss) and lodging a tax return at the end of the income year the sale contract was signed. They may receive a refund if the FRCGW amount exceeds the amount of tax payable on their tax assessment.

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.

When to apply for a variation notice

Vendors can apply for a variation to the FRCGW rate when both the following apply:

  • they're not entitled to a clearance certificate
  • the rate of 15% is too high when considering their estimated Australian tax liability on the sale of the asset.

Reasons for a variation include:

  • there's no capital gain on the transaction (for example, because of a capital loss or a CGT roll-over)
  • there is a reduced income tax liability, or tax losses (for example, capital losses can be used to reduce any capital gains)
  • a creditor of the vendor has a mortgage or other security interest over the property and the proceeds of the sale at settlement won't cover the amount to be withheld and discharge the debt the property secures
  • if a creditor acquires legal title to the property (becomes the purchaser) due to foreclosure and its security would be reduced by withholding.

Purchasers must withhold the full rate of FRCGW when there's no clearance certificate or variation provided to them at, or before settlement.

Foreign residents and the main residence exemption

Foreign residents can't claim the CGT main residence exemption, unless the life events test applies.

Apply for a variation

Variations take up to 28 days to process.

To apply for a variation of the withholding rate, you should:

  1. lodge an application as soon as the contract is signed
  2. include the sales contract with the application
  3. provide the variation notice to the purchaser at, or before settlement to ensure the reduced withholding rate applies.

When multiple vendors own a property, each vendor needs to apply for their own variation.

Apply for a variation

For help, see instructions to complete an application for a variation.

A paper application and instructions are also available. See Foreign resident capital gains withholding rate variation paper application.

Receiving your notice of variation

Variation notices are sent to the email address provided in the application or, if there's no email address, mailed to the vendor and the applicant's addresses provided.

If you choose to communicate with us via email, be aware the internet isn't a secure environment. We can't guarantee the privacy and security of personal information.

Calculate a reduced rate of withholding

The varied withholding rate we approve depends on the information provided in the application.

Vendors can calculate the reduced rate of withholding that should apply to them based on their information.

It's the vendor’s responsibility to give the purchaser a valid variation notice by the settlement date.

Refer to cost base of assets to help work out any capital gains or losses.

Multiple vendors

If there are multiple vendors selling or disposing of a property, each vendor has a responsibility to provide their own clearance certificate or variation depending on their tax residency.

See multiple vendor examples to determine how much withholding would apply in different circumstances.

Foreign resident tax returns

Foreign residents may need to apply for a tax file number (TFN) before lodging an income tax return with us.

To claim a credit for the FRCGW amount, the vendor must have a copy of the Payment Confirmation from the purchaser.

When completing a tax return:

  • declare assessable income, including any capital gain or loss from the disposal of the asset
  • claim a Credit for foreign resident capital gains withholding amounts taken from the sale proceeds.

The FRCGW amount will be refunded in full if:

  • there are no tax debts
  • there’s no CGT payable on the sale of the property
  • there's no tax payable on any other Australian sourced income.

The income year of the tax return is the year the sale contract was signed (not the date of settlement).

A credit for the amount withheld for FRCGW applies to the income year the contract was signed. It may take time before the foreign resident can lodge their tax return to declare the capital gain and claim any credit for the amount withheld. This is generally because tax returns can't be lodged before the end of the relevant income year. Any amount due will be refunded after the tax return is assessed.

If the contract is signed in one income year but the purchaser pays the FRCGW in the next income year, the capital gain and claim for the credit for FRCGW amounts should be included in the income year the sale contract was signed.

In certain circumstances, an early tax return may be lodged with us. If a foreign resident vendor isn't eligible to lodge an early tax return, they must wait until the end of the income year.

 

QC103608