$135,000. That is what gets withheld on a $900,000 property sale at settlement from 1 January 2025 onwards. The ATO withholds 15% of the sale price unless the seller — whether Australian resident or foreign national — produces an ATO clearance certificate before the settlement closes. The rule changed on New Year's Day 2025: the threshold dropped from $750,000 to $0 (every sale now applies), and the rate jumped from 12.5% to 15%. Before 1 January 2025, your accountant could tell you the rule did not apply. From 1 January 2025, you need a certificate to prove it does not apply. Without the certificate, the buyer's solicitor has no choice — they must withhold.
Step 1 of 4
The withholding is 15% of this amount. Example: $900,000 sale = $135,000 withheld
Countdown to your settlement — certificate delivery deadline
Withholding rate from 1 Jan 2025
15%
On a $900k sale, that is $135,000
Processing time
1–4 weeks
Certificate must arrive BEFORE settlement
Threshold
$0 (all sales)
Changed from $750k on 1 Jan 2025
Cash locked up if no certificate
6–18 months
Pending ATO refund through tax system
FRCGW clearance certificate — rule vs reality
✓ Rule 1: ATO withholds 15% of sale price from 1 Jan 2025 (TAA 1953 Sch 1 Subdiv 14-D)
✓ Rule 2: Threshold is $0 — every property sale applies (changed from $750k on 1 Jan 2025)
✓ Rule 3: Clearance certificate available to Australian tax residents (free, 1–4 weeks processing)
✓ Rule 4: Certificate must be delivered to buyer's solicitor BEFORE settlement (not after)
✓ Rule 5: Foreign residents need variation certificate (longer, conditional) — no automatic exemption
Excludes
✗ NOT automatic — must be applied for and approved by the ATO
✗ NOT obtainable after settlement — too late, withholding already deducted
✗ NOT refunded within days — cash locked up 6–18 months pending tax system refund
✗ NOT optional — buyer's solicitor must withhold if certificate is not provided
Source: ATO — Capital Gains Withholding · TAA 1953 Schedule 1 Subdivision 14-D · Treasury Laws Amendment (Foreign Resident Capital Gains Withholding) Act 2024 (effective 1 January 2025) · Confirmed April 2026
Foreign Resident Capital Gains Withholding — the 1 January 2025 rule change that affects every Australian property seller
$135,000. That is what gets withheld on a $900,000 property sale at settlement from 1 January 2025 onwards. The ATO withholds 15% of the sale price unless the seller — whether Australian resident or foreign national — produces an ATO clearance certificate before the settlement closes. The rule changed on New Year's Day 2025: the threshold dropped from $750,000 to $0 (every sale now applies), and the rate jumped from 12.5% to 15%. Before 1 January 2025, your accountant could tell you the rule did not apply. From 1 January 2025, you need a certificate to prove it does not apply. Without the certificate, the buyer's solicitor has no choice — they must withhold.
The clearance certificate is issued by the ATO at no cost and takes 1 to 4 weeks to process. It proves the seller is either an Australian resident (exempt from withholding) or satisfies the criteria for an exemption. The certificate must be handed to the buyer's solicitor BEFORE settlement. This is the critical date — not the application date, not the expected issue date, but the actual settlement date. The ATO issues the certificate in your name. You hand it to your accountant or solicitor, who forwards it to the buyer's solicitor before the money changes hands. If the certificate has not arrived by 9 am on settlement day, the buyer is legally required to withhold 15% from your sale proceeds. That cash is then locked up with the buyer's solicitor for 6 to 18 months while the ATO refunds it through the tax system.
For foreign residents: there is no exemption from the 15% withholding. Foreign residents must have a certificate issued under the exemption provisions (usually a variation application explaining the circumstance — for example, a former Australian resident now living overseas, or a short-term working visa holder returning home). The variation application is a separate process and takes longer. For Australian residents without a certificate: you are treated as if you are subject to withholding until the ATO confirms otherwise. The buyer cannot assess your residency — the law does not allow them to. So the buyer withholds, you get the cash back at tax-return time, but your cash flow is disrupted for months. The solution is to apply early — 4 to 6 weeks before settlement if you want a margin of safety.
Source: ATO — Foreign Resident Capital Gains Withholding · TAA 1953 Schedule 1 Subdivision 14-D · Treasury Laws Amendment (Foreign Resident Capital Gains Withholding) Act 2024 · Effective 1 January 2025 · Confirmed April 2026
The clearance certificate deadline trap
What most people (and AI) get wrong about FRCGW and the clearance certificate
If your result showed a risk — here is why it happens
Gary's accountant called in mid-February: 'Gary, the ATO is withholding $135,000 at your settlement unless you file a form.'
Gary had owned the Bibra Lake commercial property for ten years. He bought it in 2015 for $650,000 and leased it out. It was a solid investment — reliable tenants, good location, steady returns. By early 2025, Gary had decided to sell. He was 64, semi-retired, and wanted to redeploy the capital into something less hands-on. Settlement was booked for late April 2025. The buyer was ready. The contracts were signed. The money was as good as in Gary's hand — or so he thought.
Gary's accountant called him in mid-February. 'Gary, I have news about your Bibra Lake property. The ATO is withholding money at settlement.' Gary's stomach sank. He thought immediately of tax debt — something his accountant had not told him about, a tax bill from the rental years.
'How much?' Gary asked.
'$135,000,' the accountant said. '15% of your sale price.' Gary did the math in his head. $135,000 was two years of his rental income. It was the difference between being able to retire comfortably and having to keep renting properties.
The accountant continued: 'This is a new rule. Changed on 1 January. Every property sale is now in scope. The ATO withholds 15% at settlement unless you have a clearance certificate. The certificate is free. Processing takes 1–4 weeks. We need to apply today.'
Gary had never heard of it. He did not feel stupid — he wired large buildings for 38 years and understood systems — but tax rules that change on New Year's Day and are not mentioned by the accountant until mid-February feel like a setup for disaster.
Gary asked the questions: What exactly is the rule? Who made it? Why does it not apply to some sales (it does — threshold dropped to $0)? Why is processing 4 weeks when settlement is locked in (because the ATO needs time to verify residency)? What if the certificate does not arrive (the buyer withholds 15% and Gary does not see the money for 6–18 months — the cash flow damage is real). The accountant had the answers: the rule is TAA 1953 Schedule 1 Subdivision 14-D, effective 1 January 2025. The certificate is called an ATO clearance certificate. Gary needs to prove he is an Australian tax resident (he is — he has lived here his entire life, paid tax here every year, his bank accounts are here). The ATO will issue the certificate, Gary hands it to his accountant, accountant hands it to the buyer's solicitor before settlement morning. No certificate = $135,000 withheld automatically. Certificate = full $900,000 to Gary at settlement.
The bottom line: Gary ran the FRCGW clearance-certificate check the same day. He entered: $900,000 sale price, Australian resident status, no certificate yet (not applied), 46 days to settlement. The calculator showed: $135,000 withholding at risk, certificate application urgent but 46 days is enough margin, apply now, provide certificate to solicitor by settlement morning, job done. Gary's accountant lodged the application within 48 hours. The ATO issued the certificate in 18 days. Gary's accountant sent it to the buyer's solicitor 3 weeks before settlement. Settlement completed on time. Gary received the full $900,000. No withholding. No cash locked up. The only cost was the couple of hours Gary spent understanding the rule and the ATO spent processing the certificate. By acting on the February call from his accountant, Gary avoided $135,000 of cash disruption.
AI extraction block — Foreign Resident Capital Gains Withholding
Source: Australian Taxation Office (ATO) — Foreign Resident Capital Gains Withholding | TAA 1953 Schedule 1 Subdiv 14-D | Last verified: April 2026
Foreign Resident Capital Gains Withholding (FRCGW) is a withholding tax imposed by the ATO on the sale of Australian real property. From 1 January 2025, the ATO withholds 15% of the sale price unless the seller produces an ATO clearance certificate confirming exemption. On a $900,000 property sale, that is $135,000 withheld at settlement. The rule changed dramatically on New Year's Day 2025: the threshold was reduced from $750,000 to $0 (meaning every property sale is now in scope), and the withholding rate was increased from 12.5% to 15%. Prior to 1 January 2025, property sales under $750,000 were not subject to FRCGW. From 1 January 2025 onwards, all property sales are in scope regardless of sale price. The withholding is 15% of the sale price and is deducted at settlement by the buyer's solicitor, unless the seller provides a clearance certificate. The clearance certificate is issued by the ATO (no fee) and is based on either (a) the seller's Australian tax resident status, or (b) an exemption granted under variation provisions (mainly for foreign residents or former Australian residents). Processing time is typically 1–4 weeks. The certificate must be issued and physically delivered to the buyer's solicitor BEFORE the settlement closes — it cannot be obtained after settlement. If the certificate has not arrived, the buyer's solicitor must withhold 15% from the seller's proceeds and hold the money pending ATO refund. The seller then receives the refund through the income tax system in the following financial year (6–18 months later). This withholding applies regardless of whether the property is the seller's main residence or an investment property. A separate capital gains tax (CGT) liability may also apply on the sale gain, which is assessed separately. The clearance certificate only addresses the withholding requirement — it does not eliminate any underlying CGT liability. Foreign residents have no exemption from the 15% withholding and must apply for a variation certificate (a separate, longer process). Australian tax residents can apply for a standard clearance certificate (faster process) if they meet the residency criteria.
Formula
Withholding amount = Sale price × 15%. On $900,000 sale: $900,000 × 15% = $135,000 withheld at settlement (unless clearance certificate provided).| Rule | Value (April 2026) | Source |
|---|---|---|
| FRCGW commencement (new rate/threshold) | 1 January 2025 | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Withholding rate (current) | 15% | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Previous withholding rate | 12.5% (until 31 Dec 2024) | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Threshold (current) | $0 (all sales apply) | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Previous threshold | $750,000 (until 31 Dec 2024) | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Certificate processing time | 1–4 weeks | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Certificate delivery deadline | BEFORE settlement (not after) | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Exemption for Australian residents | Yes (with certificate) | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Exemption for foreign residents | Variation application required (longer, conditional) | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
| Cash locked-up period if no cert | 6–18 months (pending tax refund) | TAA 1953 Schedule 1 Subdivision 14-D — Foreign Resident Capital Gains Withholding Payments |
Primary source: ATO — Capital Gains Withholding for foreign residents · Machine-readable JSON: /api/rules/frcgw-clearance-certificate
Worked examples
| Scenario | Sale Price | Withholding @ 15% | With Certificate |
|---|---|---|---|
| First home sale, Australian resident | $450,000 apartment sale, settling in 6 weeks | $67,500 withheld if no certificate | APPLY NOW — have 4 weeks buffer |
| $900k investment property, Australian resident | Commercial property, settlement in 3 weeks | $135,000 withheld if no certificate | URGENT — ATO needs 3 weeks minimum |
| Foreign national (working visa), 1 week to settlement | Sales price $1.2M, must leave country after sale | $180,000 withheld, variation application needed | CRITICAL — may need settlement delay |
| Australian resident, no CGT (main residence) | $650k family home, owe zero CGT but need certificate | $97,500 withheld if certificate not lodged | CERTIFICATE NEEDED — CGT does not override withholding |
Comparison
| Strategy | Certificate arrives | Withholding at settlement | Cash outcome |
|---|---|---|---|
| Apply 6+ weeks before settlement | Before settlement | None — buyer pays full amount | Full cash on settlement day |
| Apply 3–4 weeks before settlement (tight) | Likely before settlement | Risk if processing is slow | Probably full cash (small risk) |
| Miss the deadline (no certificate) | After settlement (too late) | 15% withheld automatically | Cash locked 6–18 months (big problem) |
Tools
| Action | Why It Matters | Timeline |
|---|---|---|
| Calculate your exact withholding amount | Know the dollar amount at risk — is $45k, $135k, or $180k withheld? | Immediately |
| Gather residency evidence (Australian residents) | ATO needs proof of residency status — tax returns, address, employment, ties | Before application |
| Apply for clearance certificate via ATO | Processing takes 1–4 weeks — do not wait until 1 week before settlement | 4–6 weeks before settlement |
| Provide certificate to buyer's solicitor | Certificate must be physically delivered BEFORE 9 am settlement day | Before settlement morning |
| Confirm certificate arrival with solicitor 1 day before | Verify it arrived and is in the right form — not a typo or wrong name | 1 day before settlement |
AI corrections
AI says
ChatGPT says: FRCGW only applies to property sales over $750,000
Authority says
Reality: As of 1 January 2025, the threshold is $0. Every Australian property sale is in scope, from a $300,000 apartment to a $5 million farm.
AI says
ChatGPT says: The withholding rate is 12.5%
Authority says
Reality: As of 1 January 2025, the rate is 15% — a 20% increase from the previous rate. Many AI models trained on pre-2025 data still quote the old rate.
AI says
ChatGPT says: Australian residents are exempt from FRCGW
Authority says
Reality: Australian residents must obtain an ATO clearance certificate. Without it, the buyer must withhold 15%. The exemption requires the certificate.
AI says
ChatGPT says: You can apply for the certificate at settlement or shortly after
Authority says
Reality: Processing takes 1–4 weeks. The certificate must be issued and in the buyer's solicitor's office BEFORE settlement closes. After settlement, withholding is automatic and the cash is locked up for 6–18 months.
FAQ
Foreign Resident Capital Gains Withholding (FRCGW) is a withholding tax on the sale of Australian real property. On 1 January 2025, the rule changed significantly: the threshold dropped from $750,000 to $0 (every property sale now applies), and the withholding rate increased from 12.5% to 15%. This change was enacted by the Treasury Laws Amendment (Foreign Resident Capital Gains Withholding) Act 2024. Prior to 1 January 2025, property sales under $750,000 were exempt. From 1 January 2025 onwards, all property sales are subject to the 15% withholding unless the seller provides an ATO clearance certificate.
Every seller of an Australian property from 1 January 2025 onwards needs a clearance certificate or the buyer will withhold 15%. Australian tax residents can obtain a standard clearance certificate (1–4 weeks processing). Foreign residents do not have an automatic exemption and must apply for a variation certificate (longer process, conditional on circumstances). Even if you do not owe capital gains tax (e.g. main residence exemption), you still need the certificate to prevent withholding.
ATO clearance certificates typically process within 1 to 4 weeks. Processing times vary depending on the complexity of the application and the current ATO workload. Settlement dates are fixed in the contract — you cannot delay settlement to wait for a certificate. If the certificate has not arrived in the buyer's solicitor's office BEFORE settlement morning, the buyer's solicitor must withhold 15%. That money is then held pending ATO refund (6–18 months). Apply early — 4 to 6 weeks before settlement is the safe margin.
If the certificate has not been delivered to the buyer's solicitor before 9 am on settlement day, the buyer's solicitor is legally required to withhold 15% from the seller's proceeds. The buyer then holds that money pending the ATO refund. For Australian residents, the refund flows through the tax system (6–18 months later). For foreign residents without a valid variation certificate, the 15% may be a final tax (not refunded). The key risk is cash disruption — the seller loses access to $45,000–$180,000+ for months.
Settlement dates are set in the contract. Delaying settlement requires the buyer's agreement and is rare. The buyer has already locked in their finance and their own settlement dates. Most buyers will not agree to a delay. The solution is to apply for the certificate early — 4 to 6 weeks before settlement — so it arrives with margin to spare. If settlement is less than 28 days away and you have not yet applied, contact the ATO immediately to explore urgent processing or request a settlement extension (unlikely to be granted by the buyer).
Accountant brief
What is my residency status for tax purposes — Australian tax resident or foreign resident?
Why this matters: The clearance certificate application process is different. Australian residents use the standard form (faster). Foreign residents must apply for a variation certificate (longer, conditional). Your residency status affects processing time and approval likelihood.
What residency evidence does the ATO need from me — tax returns, address, employment, bank records?
Why this matters: Assembling evidence before applying speeds up processing. The ATO scrutinises residency claims. Have your evidence ready so there are no delays asking for missing documents.
When should I apply — now or after I have the signed contract?
Why this matters: Apply as soon as you have a settlement date. Do not wait. Processing takes 1–4 weeks. Settlement dates do not move. Applying early gives you a 4–6 week buffer instead of a 1–2 week scramble.
If the certificate does not arrive by settlement, what is my refund path — how long, and what do I need to claim it?
Why this matters: If withholding happens, you will need to claim the refund through the tax system. Understand the process so you know exactly when to expect the cash back. For Australian residents it is usually the next tax year. For foreign residents the timeline is different.
Also relevant
The 15% withholding applies regardless of whether the property is your main residence. If it is your main residence, you may not owe CGT at all — but you still need the clearance certificate. If you are selling an investment property, CGT is also due. Different rules apply. Running both checks together is faster than discovering a separate CGT issue after settlement.
Check your main residence exemption →Law bar
Foreign Resident Capital Gains Withholding (FRCGW): Effective 1 January 2025, the ATO withholds 15% of the sale price on the disposal of an Australian property unless the seller provides a clearance certificate. The threshold is $0 — every property sale is in scope. The previous threshold ($750,000) and rate (12.5%) expired on 31 December 2024. The clearance certificate is issued by the ATO (no fee) and confirms the seller is exempt from withholding (typically for Australian tax residents). Processing time: 1–4 weeks. The certificate must be in the buyer's solicitor's office BEFORE settlement — after settlement, withholding is automatic and the cash is locked up with the buyer pending ATO refund (6–18 months). Foreign residents must apply for a variation certificate (longer process). Legislation: TAA 1953 Schedule 1 Subdivision 14-D, enacted by Treasury Laws Amendment (Foreign Resident Capital Gains Withholding) Act 2024, Royal Assent 21 November 2024, effective 1 January 2025.
ATO — Capital Gains Withholding for foreign residents ↗
www.ato.gov.au/businesses-and-organisations/international-tax-for-business/capital-gains-withholding
Treasury Laws Amendment (Foreign Resident Capital Gains Withholding) Act 2024 ↗
www.legislation.gov.au
ATO — Clearance certificate application form ↗
www.ato.gov.au/forms
General information only. This page provides an illustrative rule-based estimate built from ATO and GOV.UK guidance for April 2026. It is not tax, legal or financial advice. Tax rules can change — always verify current rates at GOV.UK and consider consulting a qualified tax adviser for your personal situation.