Selling your property? Beware of tax changes from 1 January 2025

Effective from 1 January 2025, significant changes have been made to Foreign Resident Capital Gains Withholding (FRCGW), impacting all property transactions. The FRCGW requires buyers to withhold a portion of the purchase price when purchasing property or interests in Australian property from foreign residents, ensuring these sellers meet their capital gains tax obligations.

The first significant change is an increase in the withholding rate from 12.5% to 15% of the sale price. This change applies to property transactions where the seller is a foreign resident, ensuring a higher tax contribution from foreign investors. Additionally, the threshold for FRCGW applicability has been removed entirely, meaning all property sales will be subject to withholding.

Previously only property over $750,000 need be addressed. Now all property sellers must apply for a clearance certificate to avoid withholding. It’s important to note that the certificate can be completed by your conveyancer or solicitor, your real estate agent, your tax agent or yourself.

These updates aim to improve tax compliance, enhance fairness in the property market, and close loopholes related to foreign investments in real estate. Buyers and sellers involved in property transactions should consult with a tax professional to ensure they comply with these new regulations.