Foreign resident capital gains withholding (FRCGW) applies to real property disposals where the contract price is $750,000 or more.

The foreign resident capital gains withholding (FRCGW) rate is 12.5%. Once withheld from the sale price, you can only get it back once you lodge your tax return. Depending on the timing of the sale, you may be waiting for this money for months. If you sell property for let’s say $1m, you are looking at $125,000 that you may not be able to access for a while.

You can avoid the 12.5% being withheld by obtaining a clearance certificate prior to settlement. Note that sometimes they may take time to issue, especially if you have spent some time overseas.

How do you prevent delays to settlement?

Lodge applications for clearance certificates as early as possible

It is recommended that applications are lodged when a property goes up for sale, rather than waiting for a contract to be signed. Certificates are current for 12 months. While they do not take too long when everything goes smoothly, the standard service period is 28 days which also means the ATO will not talk to you prior to the 28 days expiry if something is not quite right.

Applications for entities take longer than applications for individuals – factor the extra time in

These are not as straightforward for the ATO to process and require manual intervention. In the ATO case it means they pass several hands. To chase the ATO up we need to provide evidence that you’d suffer financial hardship if we don’t get the clearance certificate prior to settlement.

We can request these on your behalf so don’t hesitate to reach out!