Since 1 July 2016, Foreign Resident Capital Gains Withholding (FRCGW) applies to vendors selling certain taxable property, such as Australian real estate. The withholding tax requires buyers to withhold a portion of the sale price if the vendor is a foreign resident for tax purposes. However, Australian resident vendors can apply for a Clearance Certificate to ensure that no withholding tax is deducted from the sale proceeds. The application provides the vendor’s tax residency details, allowing the ATO to confirm their status as an Australian resident.

What if You Are a Foreign Resident?

Foreign residents are not eligible to apply for a clearance certificate. Instead, if you’re a foreign resident and believe you are entitled to a variation to your CGT liability, you must lodge a variation request with the ATO.

When to Apply?

The application process for both residents and non-residents should be completed as early as possible to avoid delays in the settlement process, as it may take up to 28 days for the ATO to process. Sixth Sense Tax Recommends applying as soon as you intend to sell the property or once the contract has been signed.

Important Points to Remember

• The clearance certificate is valid for 12 months from the date of issue, so you can apply ahead of time, even before entering into a contract of sale.
• The vendor must provide the clearance certificate to the purchaser before the settlement date to ensure no withholding occurs.
• Each vendor must submit an individual application—joint applications are not allowed, even if multiple vendors are involved in the same transaction.

For more help with your application or tax residency status, contact Sixth Sense Tax for professional assistance.