Foreign Resident Capital Gains Withholding Clearance Certificate – What Sellers in Queensland Need to Know
If you’re selling real estate in Queensland, you might hear about something called a Foreign Resident Capital Gains Withholding (FRCGW) Clearance Certificate. It’s a bit of a mouthful, but it’s an important part of the process – and if it’s not handled correctly, it can cause serious delays or unexpected deductions from your sale proceeds.
What is the Foreign Resident Capital Gains Withholding Regime?
The FRCGW regime is an Australian Government measure designed to ensure foreign residents meet their capital gains tax obligations when selling certain Australian assets, including real property.
Under this regime, if a property is sold for $750,000 or more, the buyer must withhold 12.5% of the purchase price and pay it to the Australian Taxation Office (ATO, unless the seller provides a valid Clearance Certificate showing they are an Australian resident for tax purposes.
This applies whether or not the seller is actually a foreign resident – so Australian citizens selling property are still caught unless they obtain the certificate.
When Do You Need a Clearance Certificate?
You need a Clearance Certificate if:
You are selling real property (e.g., a house, unit, vacant land) worth $750,000 or more; and
You want to avoid having 12.5% of your sale price withheld by the buyer and sent to the ATO.
The certificate confirms to the buyer that they do not need to withhold any funds at settlement.
Without a Clearance Certificate, the buyer is legally required to withhold 12.5% and remit it to the ATO – even if you are an Australian citizen or resident.
How to Apply for a Clearance Certificate
Applying is relatively straightforward but needs to be done early to avoid settlement delays.
You apply through the ATO, usually online. You’ll need:
Proof of identity documents
Details of the property being sold
Your Australian tax file number (TFN)
Other basic personal information
Certificates are typically valid for 12 months from the date of issue.
Key Tips for Sellers
Apply early: It can take up to 28 days (sometimes longer) for the ATO to process applications. Apply as soon as you list your property for sale – don’t wait until you’re under contract.
One per seller: Each seller listed on the title must apply separately. If the property is jointly owned, each owner needs their own Clearance Certificate.
Check your certificate: Ensure your details are correct before providing it to the buyer’s solicitor or conveyancer.
Even Australian citizens must apply: Residency for tax purposes is based on ATO definitions, not citizenship alone.
What Happens if You Don’t Have a Certificate at Settlement?
If you don’t have a valid Clearance Certificate by settlement, the buyer must withhold 12.5% of the sale price and pay it to the ATO.
You would then need to lodge a tax return after the end of the financial year to claim the withheld amount back (if you are entitled to it). This can cause significant cashflow issues, especially if you are relying on your full sale proceeds for your next move.
At East Legal, we help our seller clients navigate the FRCGW requirements and ensure the process runs smoothly.
If you are thinking of selling or already under contract, get in touch with our team early so we can assist you with your Clearance Certificate application and ensure there are no last-minute surprises at settlement.