Significant changes are coming to the Foreign Resident Capital Gains Withholding (FRCGW) rules that could impact your property sale if you are a foreign resident. It’s crucial to understand these upcoming adjustments to ensure a smooth and efficient transaction.

Key Changes to be Aware Of:

Starting 1 January 2025, pending the Bill’s passing in Federal Parliament, two major changes to the FRCGW will come into effect:

1. Removal of the $750,000 Threshold: Currently, FRCGW only applies to property sales by foreign residents where the sale price exceeds $750,000. This threshold will be completely removed. This means that all property sales by foreign residents, regardless of the property’s value, will be subject to FRCGW.
2. Increased Withholding Rate: The current FRCGW rate of 12.5% will be increased to 15%. This means a larger portion of your sale proceeds will be withheld and remitted to the Australian Taxation Office (ATO).

What This Means for You:

• Increased Withholding: If you are a foreign resident selling a property in Australia, a larger portion of your sale proceeds will be withheld by the buyer and paid directly to the ATO. This applies to all property sales, even those below the current $750,000 threshold.
• Potential Cash Flow Impact: The increased withholding rate and removal of the threshold may impact your financial planning and cash flow, so it’s essential to factor these changes into your calculations.

Important Timeline:

• Sales settled by 31 December 2024: If your property sale settles before the end of this year, the current rules will apply. This means the $750,000 threshold will still be in place, and the withholding rate will remain at 12.5%.
• Sales settled from 1 January 2025: Sales settled from this date onwards will be subject to the new rules, including the removal of the threshold and the increased withholding rate of 15%.

Exemption for Australian Residents and Citizens:

It’s important to note that Australian residents and citizens are exempt from FRCGW. However, to avoid withholding, you must obtain an exemption certificate from the ATO.

Key Recommendations:

• Apply for an Exemption Certificate Early: If you are an Australian resident or citizen selling a property, apply for your exemption certificate from the ATO early in the sales process. Certificates are valid for 12 months. Obtaining this certificate early can help prevent potential delays at settlement.
• Seek Professional Advice: If you are a foreign resident planning to sell property in Australia, consult with a qualified tax advisor to understand the implications of these changes and how they may affect your individual circumstances.

REIWA is Committed to Supporting You:

We understand that navigating these changes can be complex. REIWA is closely monitoring the situation and will continue to provide updates and guidance to help you understand and comply with the new FRCGW requirements. Stay tuned to our website and blog for further information and resources.