In 2006, the Australian Government introduced the Foreign Resident Capital Gains Withholding Tax to prevent foreign residents from avoiding capital gains tax on property sales. Under this law, if a foreign resident sold Australian real estate worth $2.5 million or more, the purchaser was required to withhold 10% of the sale price and remit it to the ATO.
Since then, the scope of the law has steadily expanded:
- In 2016, the threshold was lowered to $2 million, and the withholding rate increased to 12.5%.
- In 2017, the threshold dropped again—to $750,000.
- And as of 1 January 2025, the threshold is now $0, and the withholding rate has risen to 15%.
This means that every purchaser of real estate in Australia must now withhold 15% of the sale price if the vendor is a foreign resident.
But here’s the catch: every vendor is assumed to be a foreign resident unless they provide a valid Tax Clearance Certificate from the ATO before settlement. Without it, even Australian-born citizens who have never left the country will have 15% withheld from their sale proceeds.
Although a refund can be claimed later, the process is often lengthy and may take several months.
To avoid this, vendors must obtain a Tax Clearance Certificate. While accountants can apply on their behalf, it is often more efficient for the vendor’s solicitor—who is already handling the sale—to take care of it.
Paul Dellios
Principal, Dellios, West & Co.
Barristers, Solicitors, Business & Investment Consultants