Paying the foreign resident capital gains withholding

Purchasing real property in Australia

Foreign resident capital gains withholding (FRCGW) is a tax and applies to vendors selling or disposing of certain taxable property.

If you are purchasing real property (property) in Australia, you may have to withhold an amount from the sale price (or its market value, if not at arm's length) and pay it to us, instead of paying the whole amount to the vendor at settlement.

If the vendor:

• provides a clearance certificate – this means you don’t need to withhold for FRCGW. The sale price is paid to the vendor.
• provides a variation notice from us – this means you must withhold an amount from the sale price at the rate specified by us. The variation notice advises you of the rate, for example 0% to 14.99%. The remainder of the sale price is paid to the vendor.
• doesn't provide a clearance certificate or a variation – this means you must withhold the FRCGW at the full rate and pay it to us.

For more information see:

• Australian residents and clearance certificates
• Foreign residents and variations.

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.

Purchasers can rely on a clearance certificate or variation notice

When you receive a clearance certificate from a vendor, you don't need to withhold.

When you receive a variation notice, you need to withhold at the rate specified.

For a clearance certificate or variation notice to be valid, check all of the following that apply are satisfied:

• the first and last names on the clearance certificate must match the property's Certificate of Title, or other asset ownership documentation (proof of name change should have been provided to us at the time of applying) - see Name mismatch
  • middle names don’t need to be supplied or match
  • a title (honorific) match isn't required, for example 'Miss', 'Ms'
• the settlement date must be on or before the expiry date of the clearance certificate or variation notice
• for a variation notice
  • the asset is the one specified in the sale contract
  • the sale price of the asset (or its market value, if not at arm's length) must not exceed the maximum sale price specified in that variation. For example, if the variation states $1 million and the final sale price is $1.1 million, then the variation doesn't apply and withholding must be applied at the full rate.

If you think a clearance certificate isn't valid

If the clearance certificate or the vendor variation notice isn't valid (for example names don't match), the purchaser must withhold an amount of FRCGW at the applicable rate from the sale price.

If a purchaser needs to check if a clearance certificate or variation is valid, phone us on 13 28 66 (Fast Key Code 4 2).

For a:

• clearance certificate, provide the following
  • the number from the 'Our reference field' at the top of the certificate
  • the vendor’s name, as it appears on the clearance certificate
• variation notice, have the following information ready
  • BET number from the ‘Our reference’ field at the top of the notice
  • vendor’s name, varied rate and applicable asset details as they appear on the notice.

When purchasers must withhold and pay

If you purchase Australian real property and the vendor doesn't provide a valid clearance certificate or variation notice, you must withhold an amount from the sale price (or market value) and pay it to us at settlement.

The withholding amount is calculated on the sale price (or market value) before any adjustments for disbursements (for example, council rates, water and sewer charges and strata levies).

There are penalties and interest that apply if the purchaser either doesn't withhold when they are required to do so at settlement, or if they fail to pay this amount to us on the day of settlement.

If there's more than one vendor, see Multiple vendors.

Paying FRCGW

Follow these steps to pay FRCGW:

1. Complete an online Foreign resident capital gains withholding Purchaser Payment Notification form as early as possible. You will be issued with a payment reference number (PRN). You need this to pay the withheld amount at settlement. If there are multiple purchasers, lodge either
   • one form if there are 10 or less purchasers
   • a form for each purchaser.
2. Once processed, you will get
   • a payment reference number (PRN) – only one PRN is issued, ensure you keep this safe
   • a link to a PDF downloadable payment slip and barcode to use at Australia Post. Print the downloadable barcode to avoid keying errors.
3. Before settlement, check the Purchaser payment notification form and contact us if there are changes to the settlement date on the form.
4. Use the PRN, payment slip and barcode to pay the withholding at settlement. See How to pay.

For more information, see Foreign resident capital gains withholding purchaser payment notification online form and instructions.

Instructions for the Foreign resident capital gains withholding purchaser payment notification paper form are also available.

How to pay

Use the PRN, payment slip and barcode to pay the withholding on, or before, becoming the owner of the property.

If there are 2 or more purchasers, use the same PRN or payment slip, even if paying at different times.

All payments must be made in Australian dollars.

The safest and easiest payment methods are:

• BPAY®
• electronic funds transfer.

Payment can also be made in person at Australia Post using a cheque (Note: Large withholders must pay the subdivision 14-D withholding amount by non-electronic means).

A full list of payment options is available at Paying the ATO.

Proof of payment

A receipt from either Australia Post or us is proof of payment and provides confirmation that the purchaser has fulfilled their FRCGW obligations.

A payment confirmation email or letter will be sent to the nominated contact on the purchaser payment notification form.

Confirmation for vendor

At settlement, give a copy of the payment confirmation to the vendor, so they have the information they need to complete their tax return.

Multiple purchasers

When there's more than one purchaser, they must withhold an amount according to their percentage of ownership.

Only one PRN is issued per Purchaser payment form, even if multiple purchasers are entered on the form.

Where there are multiple purchasers, you can use the PRN or payment slip to make one payment of the total amount owing or a separate payment for each purchaser.

You may provide one payment together with the details on how to apportion this amount.

 

Multiple vendors

If there are multiple vendors selling or disposing of a property, each vendor must provide their own clearance certificate or variation notice.

The following examples will help you work out the rate of withholding from a property sale when there is more than one vendor.

 

 

 

Mortgagee sales

When a creditor (such as a bank) requires a mortgagor to sell the property, there are 3 common situations:

1. The mortgagor keeps the title to the sale while the mortgagee orders the property be sold but hasn't repossessed the title to the property.
   • If there's no clearance certificate, you must withhold an amount from the sale.
   • If there's a variation notice, withhold the rate specified in the notice.
2. The mortgagee takes possession of the property and sells it, but there's no transfer of title from mortgagor to mortgagee.
   • The mortgagee can apply for a variation notice to have the withholding reduced. You must withhold the rate on the variation notice from the sale price.
3. Foreclosure, when the mortgagee repossesses and takes the title to the property. FRCGW may apply when
   • the transfer of title from the mortgagor to the mortgagee (generally, a sale of the property at market value)
   • the transfer of title from the mortgagee to the final purchaser.

However, if the mortgagee is an Australian Deposit-taking Institution (such as an Australian bank), in some circumstances, the rate of withholding is varied to 0%. For more detail, see PAYG Withholding variation for foreign resident capital gains withholding payments – no residue after a mortgagee exercises a power of sale 2020External Link.

Compulsory acquisitions by government authorities

Certain Australian government authorities can exercise powers under state and territory legislation for the compulsory acquisition of property. Generally, a property is acquired, and ownership of the property passes, on the date that the acquisition is published in the relevant government gazette.

To find out more, refer to Compulsory acquisitions by government authorities.

General interest charge

If the purchaser withholds but fails to pay FRCGW when they become the owner of the asset, general interest charge (GIC) is imposed.

GIC accrues from the date of settlement.

Penalty for failing to withhold

Purchasers failing to withhold and pay FRCGW at, or before the settlement date may be subject to a penalty equal to 10 penalty units or the FRCGW amount they failed to withhold.

They will receive written notice about their liability to pay the penalty and the reasons for the imposition of the penalty.

A purchaser may also be subject to the general interest charge on any penalty amounts not paid by the due date.