Change to Foreign Resident Capital Gains Tax Withholding

Change to Foreign Resident Capital Gains Tax Withholding

For those of you considering buying or selling real estate in the near future you may be aware that there is a Foreign Resident Capital Gains Withholding (“FRCGW”) which, in the case of real property being sold for a price of $2m or more, requires the purchaser to withhold 10% of the purchase price from the vendor (whether he or she is a foreign resident or not) and to submit this sum to the Australian Tax Office on account of possible capital gains tax liability UNLESS a clearance certificate  from the ATO is provided to the purchaser by the vendor before settlement.

The big news is that as from 1 July 2017 (subject to Commonwealth legislation passing beforehand) the FRCGW will apply to the sale of real estate where the price is $750,000 or more (basically everything in Sydney!) and the withholding amount will be at the rate of 12.5%.