Clearance Certificates when Selling Australian Property
All Australian residents (for tax purposes) must have a clearance certificate issued by the ATO when selling property. If not, the purchaser will need to withhold a percentage of the sale price (or market value) for Foreign Resident Capital Gains Withholding (FRCGW). The clearance certificate must be provided to the purchaser at or before settlement.
FRCGW was introduced to ensure foreign residents pay any relevant Capital Gains (CG) tax when selling their Australian property. A flat percentage of the property value is withheld by the purchaser and paid directly to the Australian Tax Office (ATO) at or before settlement. The foreign resident then needs to lodge a tax return which includes any relevant CG to receive a refund (if any) of the net amount.
Rates
FRCGW applies to the market value of the property contract. The rates are as follows:
- Up to 31 December 2024 12% on property valued at $750,000 or more
- From 1 January 2025 15% on all property
How to apply
Australian residents can apply for a FRCGW Clearance Certificate via the ATO website. Your solicitor or registered tax agent can also apply for the certificate on your behalf.
The ATO advise lodgement at least 28 days prior to settlement to allow for processing.
The certificates are sent via email (or posted if no email address is provided).
Individuals can also obtain their certificate via the Communication section in their myGov account.
What if a clearance certificate wasn’t provided to the purchaser at or before settlement and FRCGW was withheld?
FIrstly, you need to obtain a copy of the FRCGW payment confirmation from the purchaser for proof.
The FRCGW credit is then claimed in your tax return in the year the property was sold (contract date). Your tax return for the relevant year will also include any Capital Gains (if applicable) on the transaction. It is important to note that your tax return generally can’t be lodged before the end of the relevant income year. This means there will likely be a delay before any credits can be refunded.
Please contact Cambrian Hill Accounting if you would like any assistance when selling a property.