Foreign resident capital gains withholding (FRCGW) of 12.5% applies for all property sales of $750,000 or more.

Foreign resident capital gains withholding (FRCGW) of 12.5% applies for all property sales of $750,000 or more. At a minimum, that is $93,750 being withheld from the sale and paid to the ATO, unless there is an approved variation.

The most common reasons why a seller may apply for a variation include:

• making a capital loss
• not having an income tax liability
• foreclosure.

In 2023 over 60% of applications for variations were lodged late, affecting settlement. When your clients are too late applying, the conveyancer or solicitor has no choice but to withhold 12.5%.

Tips

• Include the sales contracts with the variation application.
• Variations must be lodged online at least 28 days before property settlement to ensure processing time.
• The main residence exemption doesn’t apply to foreign residents.
• Australian residents for tax purposes must have a clearance certificate before settlement to prove their residency for tax purposes, so no withholding occurs.

If you have any questions, feel free to ask them in the comment section. We will be happy to answer all your queries.