NEW REQUIREMENTS FOR ALL SELLERS FROM 1 JANUARY 2025 – DON’T GET CAUGHT OUT
The Foreign Resident Capital Gains Tax withholding scheme applies to sellers disposing of property and is designed to assist with the collection of tax liabilities owed by non-residents.
The Federal Government has passed changes to the existing withholding scheme.
For contracts entered into on or after 1 January 2025, the following changes will apply:
- The $750,000.00 property value threshold will be removed such that the withholding rules will apply to all property sales, regardless of the purchase price; and
- If the seller does not provide an ATO clearance certificate to the buyer prior to settlement, 15% of the purchase price must be remitted to the ATO out of the sale proceeds (increased from 12.5%).
As such, all sellers will need to obtain a clearance certificate from the ATO. This can be done at the following link: https://www.ato.gov.au/single-page-applications/frwt-certificate
Where a seller is an Australian tax resident, the ATO will issue a clearance certificate confirming that no withholding is required. If a seller is not an Australian tax resident and cannot obtain the certificate, 15% of the purchase price must be withheld by the buyer and paid to the ATO. A seller can apply for a refund (if applicable) when they lodge their next income tax return.
It can take up to 28 business days to obtain the clearance certificate. As such, we recommend sellers apply for this as soon as possible.
Where there is more than one seller, each seller must obtain a clearance certificate.
The clearance certificate remains valid for 12 months and is free to obtain.
