Foreign-resident CGT withholding is now 15%: the one CGT change already law

Every Australian buyer who settles a property purchase with a foreign-resident vendor is now legally obliged to withhold 15% of the contract price at settlement and remit it to the ATO, unless the vendor produces a valid Clearance Certificate before the keys change hands. The rule applies to every sale, at every price point, in every state. There is no $750,000 threshold any more. There is no rate of 12.5% any more. This is the one capital gains change that is legislated, in force, and operating right now on settlements happening this week.

The Foreign Resident Capital Gains Withholding regime (commonly FRCGW) changed on 1 January 2025. Two amendments landed together. The withholding rate stepped up from 12.5% to 15%. The $750,000 property-value threshold, below which the regime previously did not apply, was removed entirely. Both changes are confirmed in ATO guidance and the PwC tax-alert coverage from late 2024.

How the mechanism actually works

FRCGW is a buyer-side obligation. The ATO does not chase the foreign vendor directly at settlement; it requires the Australian buyer to hold back 15% of the purchase price and remit it on the vendor's behalf. The amount is a payment on account against the vendor's eventual Australian tax liability, not a final tax in itself. The vendor reconciles the position later through an Australian return.

• Vendor produces an ATO Clearance Certificate before settlement.The certificate is the ATO's confirmation that the vendor is an Australian tax resident for the purposes of the disposal. No withholding applies. Settlement proceeds normally and the buyer pays the full contract price.
• Vendor is a foreign resident, or fails to produce a certificate in time. The buyer (in practice their conveyancer or solicitor) must withhold 15% of the contract price at settlement, pay the balance to the vendor, and remit the withheld amount to the ATO within one month of settlement.
• Vendor reconciles via their Australian tax return.The 15% withholding is a credit against the vendor's actual CGT liability for the year. If the real CGT bill is lower than the amount withheld, the vendor receives a refund. If higher, they pay the shortfall.

The Clearance Certificate is the single most important document in the entire process. It is free to apply for, valid for twelve months from issue, and an Australian-resident vendor who forgets to obtain one in time will see 15% of their sale price sitting in an ATO suspense account until they file a return months later. The application typically takes 14 to 28 days to process, which is why most conveyancers raise it at the moment the contract is signed rather than the week before settlement.

Worked example: a $1.2M Sydney sale

A foreign-resident vendor sells a Sydney apartment to an Australian buyer for $1,200,000. No Clearance Certificate is produced (the vendor is genuinely non-resident and is not entitled to one). At settlement the buyer's solicitor retains $180,000, which is 15% of $1,200,000, pays the remaining $1,020,000 to the vendor, and remits the $180,000 to the ATO within one month.

The vendor then lodges an Australian tax return covering the disposal. Suppose the actual CGT calculation works out to $80,000 of tax payable on the gain (after cost-base adjustments, hold-period treatment, and the relevant non-resident rules). The $180,000 already remitted is credited against the $80,000 liability. The vendor receives a $100,000 refund. The withholding was a cash-flow event, not the final tax outcome.

Compare the same transaction under the pre-2025 regime. The $1.2M sale sat above the old $750,000 threshold, so withholding applied at the old 12.5% rate. That produced a $150,000 withholding rather than $180,000. The dollar gap on this specific deal is $30,000 of additional cash held by the ATO until the vendor reconciles. Not a tax increase in substance, but a real timing and liquidity hit for the vendor.

The bigger shift is at the bottom of the market. A foreign-resident vendor selling a $600,000 regional unit under the old rules faced zero withholding (the price sat below the $750k threshold, so FRCGW did not apply at all). The same sale today produces a $90,000 withholding (15% of $600,000) held by the ATO until reconciliation. For lower-value sales by foreign-resident vendors, the regime has moved from "does not apply" to "applies in full," and the cash-flow consequence at settlement is significant. The CGT calculator models the actual tax that will reconcile against the withholding once the return is lodged.

Why this matters for Australian buyers

The obligation sits on the buyer, not the vendor. If a buyer settles without withholding when withholding was required, the buyer is personally liable to the ATO for the unwithheld amount. The vendor walks away with the full sale proceeds; the ATO comes looking at the Australian-resident buyer for the 15%. Recovering the money from a foreign-resident vendor who has already taken the proceeds offshore is rarely realistic.

Several practical consequences follow.

• Vendor residency status is now a settlement-critical question.The buyer's conveyancer or solicitor must confirm it on every purchase. The default assumption ("the vendor looks Australian, they have an Australian name, they live here") is not a defence. A Clearance Certificate produced by the vendor before settlement is the only safe answer.
• Off-the-plan contracts and family-trust vendor structures deserve extra attention.A trust with foreign beneficiaries, a company with foreign-resident shareholders, or a developer entity with offshore parents can all trigger FRCGW even when the immediate vendor name on the contract looks domestic. The Clearance Certificate is entity-specific, and the buyer's side must verify it matches the actual contracting party.
• Settlement timing tightens. A Clearance Certificate application takes 14 to 28 days to process. A six-week contract on a vendor who has not applied yet is already on borrowed time; a four-week contract is high-risk. Bringing the certificate question up at contract signing, rather than at the final settlement statement, is the only way to keep the timetable.
• This is the kind of complexity that justifies a solicitor over a basic conveyancer. The sibling article on conveyancer versus solicitor in Australia covers the split in detail. FRCGW exposure on a mis-identified vendor is exactly the kind of six-figure downside risk that a fixed-fee conveyancer is not set up to carry.

The vendor side: what the 15% actually costs

For a genuine foreign-resident vendor, the 15% withholding is a timing cost, not a permanent tax. The withheld amount is a credit on the vendor's Australian return, and any excess over the actual CGT liability is refunded. The economic cost is the opportunity cost of having 15% of the sale price parked with the ATO for the months between settlement and lodgement. On a $1.2M sale, that is $180,000 sitting in the ATO's hands rather than the vendor's, often for six to twelve months.

There is one important interaction with the main residence exemption. A property that would otherwise be CGT-exempt under the main-residence rules still attracts FRCGW if the vendor is foreign-resident at the date of disposal and cannot obtain a Clearance Certificate. The exemption may still apply on reconciliation (subject to the post-2020 foreign-resident carve-out covered in the main residence CGT exemption rules article), but the 15% still gets withheld at settlement and the vendor recovers it later. Cash-flow first, exemption second.

The arithmetic of the underlying CGT calculation, against which the 15% withholding ultimately reconciles, is unchanged. The worked example in the CGT investment property worked example article still applies for the substantive tax bill; FRCGW simply changes how the money moves at settlement.

What's next: the April 2026 draft

Treasury released a further round of draft legislation on 10 April 2026, with consultation closing 24 April 2026. The draft proposes additional tightening of the FRCGW regime, with a commencement date of 1 July 2026. The bill has not yet been introduced to Parliament. The current 15% rate and no-threshold position remain the operative law until and unless the new tranche passes.

The Treasury consultation page (consult.treasury.gov.au) carries the draft text and the explanatory materials. The practical guidance for transactions settling in the next few months is unchanged: 15% withholding, no threshold, Clearance Certificate or buyer remits.

How this lands on a typical purchase

Most Australian-to-Australian purchases will never trigger FRCGW. The vendor obtains a Clearance Certificate as a matter of routine, the buyer's conveyancer confirms it before settlement, and the transaction settles at the full contract price. The 15% number is invisible to the participants.

The transactions that need real attention are the ones where the vendor is, or might be, foreign-resident: expat owners selling from overseas, trust and corporate vendors with offshore links, deceased estates with non-resident beneficiaries, and developer entities owned by overseas parents. These are the deals where the buyer's legal team needs to confirm certificate status early and structure settlement around the answer. The cost of getting it wrong is the buyer wearing a 15% liability that the foreign-resident vendor has already pocketed.

For joint purchasers and partnered buyers, the obligation falls on whoever signs the contract; the buying property with a partner piece covers how joint-tenancy and tenants-in-common structures share the liability. Get the certificate question answered before the deposit, not after settlement. On Burbfinderthe CGT calculator works the substantive tax position; the withholding sits on top of it as a settlement-day cash-flow event that the buyer's side runs.