What Foreign Resident Sellers and Buyers Need to Know
Changes to Australia’s Rates and Rules from 1 January 2025
The Australian Taxation Office (ATO) is reminding property sellers, buyers and industry professionals of their obligations under the Foreign Resident Capital Gains Withholding (FRCGW) rules. The measure applies when certain Australian property interests are sold or transferred, ensuring foreign residents meet their capital gains tax liabilities.
Unless the seller is an Australian resident with a valid clearance certificate, or a foreign resident with an approved variation notice, the purchaser must withhold a percentage of the property’s market value at settlement and pay it directly to the ATO. This applies to a wide range of assets, including residential and commercial property, vacant land, mining rights, leases and certain indirect property interests.
From 1 January 2025, the FRCGW withholding rate increases from 12.5% to 15%, and will apply to all property values, removing the previous $750,000 threshold.
Residency for tax purposes is determined by ATO criteria, which differ from those used for immigration or social security residency definitions. Market value is generally based on the negotiated sale price, but related-party transactions require an independent professional valuation.
Some transactions—such as those on approved stock exchanges, certain insolvency sales or securities lending arrangements—are exempt from the withholding requirement.
For a full explanation of how the withholding rules apply in different circumstances, the ATO has published a short video titled What you need to do when selling property in Australia available via its website.
Before buying or selling property in Australia, check if FRCGW applies. Apply early for a clearance certificate or variation notice if eligible, and seek professional advice from Alliott NZ in Auckland to ensure a smooth settlement without unexpected withholding.
- Read more: ATO – Foreign resident capital gains withholding overview
- Watch: FRCGW video on ATO website
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