Aussie sellers at risk of 15% withholding under new ATO rules
As of January, all properties sold in Australia are required to get a clearance certificate from the taxation authority or risk 15 per cent of the sale price being withheld.
The Australian Taxation Office (ATO) has expanded its foreign resident capital gains withholding (FRCGW) rules to apply to all Australian residents who own property.
Under the revised regulations, anyone selling property in Australia must provide the buyer with a clearance certificate confirming their status as an Australian resident for tax purposes at the time of settlement or earlier.
The updated rules apply to contracts signed on or after 1 January 2025. Sellers who have signed agreements before are not impacted by the new requirements.
This follows updates to legislation for FRCGW with the Treasury Laws Amendment Bill passing on 28 November 2024.
Previously, the FRCGW tax regime applied to foreign property owners and Australian resident property owners with homes valued at $750,000 or more with a tax rate of 12.5 per cent.
Under the changes, the withholding rules apply to all properties sold across the country with a withholding rate increasing from 12.5 per cent to 15 per cent, and the $750,000 property value threshold has been removed.
According to the ATO, Australian home owners who don’t provide a clearance certificate by the settlement will see 15 per cent of the sale price being withheld by the purchaser and paid to the tax office.
If an amount is withheld from the sale price, the seller will only receive any applicable refund after their next income tax return is processed on the following tax period.
While most clearance certificates will be issued within a few days, the ATO urges vendors to apply early, as in some cases, they could take up to 28 days to be issued. Each certificate is then valid for 12 months.
FRCGW is designed to support the collection of tax liabilities owed by non-residents selling Australian property.