ATO changes to the foreign resident capital gains withholding: Settlement agents bulletin Issue 70 (June 2017)

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Property industry

23 June 2017

Impact on property sales of $750,000 or more

On 1 July 2017, the proposed changes to the Foreign Resident Capital Gains Withholding (FRCGW) rate and threshold will take effect.

These changes will apply to contracts entered into on, or after 1 July 2017 for real property disposals where the contract price is $750,000 and above.  The FRCGW tax rate will also change from the existing rate of 10% to 12.5%. 

The existing $2 million threshold and 10% rate will still apply for any contracts entered into before 1 July 2017 even if they are not due to settle until after 1 July 2017.

The change to the threshold from $2 million to $750,000 will result in many more properties requiring a clearance certificate for exemption of the withholding.  The Australian Taxation Office (ATO) can only grant clearance certificates to a seller who is an Australian resident.  

Australian resident sellers of real property with a market value of $750,000 or above must apply for a clearance certificate to ensure no funds are withheld from their sale proceeds.

Important: If the seller does not provide the clearance certificate before the settlement of the transaction the purchaser will be required to withhold 12.5% of the purchase price and pay this to the ATO. 

Further information and the Foreign resident capital gains clearance withholding certificate application form can be obtained by visiting the ATO website.

Consumer Protection
Bulletin
Last updated 12 Sep 2017

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