New laws have been introduced from 1 January 2025 that make changes to the Foreign Resident Capital Gains Withholding (‘FRCGW’) Scheme. These changes are relevant to most persons buying and purchasing property in Australia.
What Is the Foreign Resident Capital Gains Withholding Scheme?
Foreign residents may incur capital gains tax on the sale of real property in Australia. Purchasers are required to withhold this amount and remit this to the Australian Taxation Office (‘ATO’) unless the vendor is an Australian resident for tax purposes. Vendors can apply for a clearance certificate with the ATO certifying that they are not a foreign resident. This certificate must be provided to the purchaser prior to settlement.
There is no mandate to provide a clearance certificate if the vendor is an Australian resident. Rather, the mandate is on a purchaser to withhold FRCGW on all real property sales unless the vendor provides a clearance certificate.
What Withholding Changes Have Been Introduced?
Relevant changes from 1 January 2025 are that:
- The withholding rate was increased from 12.5% – 15% of the first element of the property cost base after the acquisition (generally the purchase price); and
- The $750,000 property threshold value was removed so that withholding rules now apply to all real property sales.
Does the scheme apply to registered charities?
Purchasers are not liable to remit FRCGW to the ATO where the vendor is a registered charity with the Australian Charities and Not-for-profits Commission (‘ACNC’), so long as the vendor provides documentation that demonstrates this (e.g. ACNC registration certificate). Therefore, provision of a clearance certificate by vendors registered with the ACNC is not required.
Have a question about charity registration, tax exemptions and more?
Vocare Law is well equipped to assist our charity and not-for-profit clients with a wealth of collective knowledge and over two decades experience providing insight and advice in this area. . if you have any questions about registering your entity as a charity, applying for tax exemptions, and more. Contact our office on 1300-VOC-LAW / 1300-862-529 or email: enquiry@vocarelaw.com.au
This article was written by Sarah Gates & Paul Neville.
**The information contained herein does not, and is not intended to, constitute legal advice and is for general informational purposes only.
