FRCGW Explained: 15% Withholding on Property Sales 2026-27

The 30-second answer

If you’re selling Australian property in 2026-27, there’s a good chance the buyer will hold back 15% of the sale price at settlement and send it straight to the ATO. That happens unless you hand the buyer an ATO clearance certificate before settlement day. The rule is called foreign resident capital gains withholding (FRCGW) — and despite the name, it catches Australian residents too. Since 1 January 2025 there is no price threshold, so even a modest apartment sale is in scope.

The 15% is not a final tax. It’s a credit against your actual capital gains tax bill. If you owed less — or nothing at all — you get the difference back when you lodge your tax return. But “eventually” can mean your money sits with the ATO for a year or more. On a $900,000 sale, that’s $135,000 you can’t use for your next deposit.

This guide walks through exactly how FRCGW works in 2026-27, who needs a clearance certificate, what foreign residents should do instead, the worked numbers, the refund process — and the strengthened foreign-resident CGT regime that commenced on 1 October 2026.

How FRCGW actually works

Here’s the mechanic in plain terms. The ATO wants to make sure foreign residents pay capital gains tax on Australian property. The problem: by the time a tax return is due, the seller may have left the country and the money may be gone. So the ATO collects at the source — through the buyer.

When you sign a contract to sell Australian real property (and the contract is dated on or after 1 January 2025), the purchaser is legally obliged to withhold 15% of the purchase price and remit it to the ATO at settlement — unless the seller provides one of two documents:

• A clearance certificate — confirms the seller is an Australian resident for tax purposes. The buyer withholds nothing.
• A variation notice — issued by the ATO, typically to a foreign-resident seller whose actual tax bill will be less than 15% of the price. The buyer withholds at the varied rate (anywhere from 0% to 14.99%).

No certificate and no variation? The buyer must withhold the full 15%. If the sale isn’t at arm’s length — say you’re selling to a family member for mates’ rates — the 15% is calculated on the property’s market value, not the contract price.

The buyer’s side matters here too. Purchasers who fail to withhold when they should can face penalties and interest. That’s why conveyancers and solicitors are so twitchy about this paperwork — it’s the buyer’s neck on the line as much as the seller’s cash.

The rates: what changed on 1 January 2025

The rules you’re hearing about now are the tightened version. Here’s the timeline:

Contract signed	Withholding rate	Price threshold
On or after 1 January 2025	15%	None — every sale
1 July 2017 – 31 December 2024	12.5%	$750,000 or more
1 July 2016 – 30 June 2017	10%	$2,000,000 or more

The legislative basis is Act No. 135 of 2024 (Treasury Laws Amendment (2024 Tax and Other Measures No. 1)). The critical point for everyday sellers: the old $750,000 threshold is gone. Before 2025, a $600,000 unit sale never triggered the regime. Now it does, which is why sellers who’ve sold before can get caught out — the rule they remember isn’t the rule anymore.

Note the trigger date is the contract date, not settlement. A contract signed on 20 December 2024 that settles in March 2025 stays on the old 12.5% / $750,000 settings.

Who’s caught — it’s wider than “foreigners selling houses”

Two big misconceptions: that this only affects foreign sellers, and that it only covers houses.

Residency is about tax status, not your passport. An Australian citizen who has been living in London for three years is likely a foreign resident for tax purposes, and the regime treats them that way. Conversely, the ATO will confirm your residency status when you apply for a clearance certificate — and residency can change, so the status at contract time is what counts.

The scope is broader than residential houses. The regime captures “taxable Australian real property”, which includes vacant land, commercial buildings, rural properties, mining and prospecting rights, and leases over real property. It also reaches indirect interests: shares in a company, or units in a trust, where the underlying value is principally derived from Australian real property. Option fees are in scope too — if the grantor of an option over real property is foreign, the option fee can be withheld on.

If you’re unsure whether your transaction falls in, this is exactly the sort of pre-contract question to run past your conveyancer or accountant. The regime was designed for substance over form — structuring a sale through shares instead of direct property doesn’t dodge it. For the CGT calculation itself once you’re in the net, our CGT calculator walks through the gain step by step.

The clearance certificate: the resident seller’s shield

Every Australian resident selling Australian real property must have a clearance certificate and give it to the purchaser at or before settlement. Without it, the buyer is legally required to withhold 15% — even if you’re as Australian as they come.

How it works in practice:

1. Apply online through the ATO as soon as you decide to sell. The application is free. The ATO confirms your residency status as part of processing.
2. Allow 28 days. That’s the standard processing time, and applications get held up for boring, avoidable reasons: tax returns not lodged, name or address mismatches with ATO records, or records that simply aren’t current. Get your tax house in order before you apply.
3. The certificate is valid for 12 months. So apply early — even before you’ve found a buyer. There’s no downside to holding one.
4. Every vendor needs their own. This is the joint-ownership trap: if you and your spouse own a property together and only one of you provides a certificate, the buyer must withhold 15% on the other owner’s share. Each individual vendor is a separate test.

The number-one reason sellers end up with 15% withheld is embarrassingly simple: they didn’t know, or they applied too late. The certificate is a small piece of admin that protects a very large sum. On a $1.2 million sale, a forgotten certificate means $180,000 diverted to the ATO at settlement.

Worked example: the $780,000 expat sale

Let’s make this concrete. Mia moved to Singapore in 2022 and is a foreign resident for tax purposes. In November 2026 she sells her Brisbane investment property:

• Sale price: $780,000
• Withholding at settlement (15%): $117,000 — paid to the ATO by the buyer, not to Mia
• Mia receives at settlement: $663,000

Now her actual capital gains tax. She bought the property in 2016 for $520,000, paid $15,000 stamp duty and $12,000 in legal and selling costs. Her cost base is $547,000. Capital gain: $780,000 − $547,000 = $233,000.

Foreign residents generally can’t use the 50% CGT discount on gains accrued after May 2012, so the full $233,000 is taxable. Non-resident individual rates for 2026-27: 30 cents in the dollar up to $135,000, 37 cents from $135,001 to $190,000, 45 cents above $190,000 (no tax-free threshold). Her tax on the gain:

• $135,000 × 30% = $40,500
• $55,000 × 37% = $20,350
• $43,000 × 45% = $19,350
• Total: $80,200

The $117,000 withheld is a credit against that $80,200. Mia lodges her Australian tax return, claims the credit, and gets a $36,800 refund. The system worked — but she was $117,000 short at settlement and waited months to get the excess back.

Now flip it. Same numbers, but Mia is an Australian resident who simply forgot the clearance certificate. The buyer withholds $117,000 from a resident seller. Her actual CGT bill might be far lower (she’d get the 50% discount, bringing the taxable gain to $116,500). She still gets the excess back — but only after lodging, and only because she did the paperwork the ATO expected before settlement.

Foreign residents: don’t apply for a clearance certificate — apply for a variation

Here’s a genuine trap flagged by expat tax specialists: agents and conveyancers hand foreign-resident sellers a generic checklist that says “apply for a clearance certificate.” A foreign resident cannot get a clearance certificate. The certificate is proof of Australian tax residency — applying for one when you’re not resident wastes weeks and solves nothing.

What foreign-resident sellers can do is apply to the ATO for a variation notice before settlement. If your actual tax on the sale will be less than 15% of the price, the ATO can set a lower withholding rate — anywhere from 0% to 14.99%. Common situations where a variation makes sense:

• You’ll make a small gain, break even, or a loss on the sale
• You have capital losses carried forward to offset the gain
• You’ve made (or will make) super contributions that reduce your overall tax
• The 15% would cause genuine financial hardship

Getting the variation amount right means estimating your actual gain and liability — the kind of calculation worth having a specialist check. The application must be approved before settlement, so like the clearance certificate, start early.

And one more thing foreign-resident sellers discover too late: since 1 July 2020, foreign residents have generally lost the main residence exemption altogether. Sell your former Australian home while you’re a non-resident and the gain can be taxable all the way back to purchase — the old six-year absence rule most expats still quote doesn’t apply (there’s only a narrow “life events” exception for those non-resident six years or less). The 15% withholding is just the visible part; the tax bill underneath can be the real shock. Our guide to non-resident CGT on property goes deeper.

Getting your money back: the refund steps

If an amount was withheld — whether you’re a resident who missed the certificate or a foreign resident with a genuine credit — the path back is through your tax return:

1. Get the payment confirmation from the purchaser. This is your proof the amount was remitted to the ATO. Chase it at settlement; don’t discover it’s missing at tax time.
2. Lodge an Australian tax return for the year of sale — even if your income is below the lodgment threshold. No return, no refund.
3. Declare the disposal properly: report the capital gain or loss in the CGT section of the return.
4. Claim the credit for the foreign resident capital gains withholding amount (the return has a specific label for it). One labelling trap accountants see: don’t report the withheld amount at the Foreign Income Tax Offset question — the withholding credit has its own place.
5. Wait for the assessment. If the withheld amount exceeds your actual tax, the excess comes back as a refund. If you had no tax debt and no gain, it comes back in full.

Timing matters. If you sign a contract and the financial year has ended, you can lodge straight away for that year. If the year hasn’t ended, you wait until 1 July. Either way, the money can be tied up for many months — which is exactly why avoiding the withholding in the first place (certificate or variation) beats reclaiming it later.

The 1 October 2026 twist: the regime just got stronger

FRCGW sits inside a wider foreign-resident CGT framework — and that framework was overhauled weeks ago. The government’s Strengthening the Foreign Resident Capital Gains Tax regime measure received royal assent and commenced on 1 October 2026 (announced in the 2024–25 Budget, enacted via the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Act 2026).

What’s new from 1 October 2026:

• Broader definition of taxable Australian real property. A new statutory definition of “real property” now includes land, rights and interests relating to land, assets fixed to land, and leases or licences over those assets — plus water rights. More foreign-held assets are now inside the CGT net.
• The principal asset test is now measured over 365 days before a CGT event, not at a single point in time. This decides whether shares or units in a land-rich entity are taxable — and it’s much harder to structure around now.
• New notification requirements for foreign vendors disposing of assets worth $50 million or more: vendors making a declaration that their membership interests are not indirect Australian real property interests must notify the ATO at least 28 days before settlement, and purchasers must sanity-check declarations they receive.
• A transitional 50% CGT discount for eligible foreign residents disposing of certain renewable energy assets (extended to 30 June 2040).

The changes aren’t retrospective for settled disposals, and there’s no grandfathering for assets already held — foreign residents holding shares in land-rich companies, water entitlements, or assets affected by state severance provisions should check whether they’re now inside the net. The ATO published a dedicated overview of the new foreign resident CGT measure with the notification form and instructions.

Common mistakes that cost real money

1. Confusing citizenship with tax residency. The ATO doesn’t care about your passport — it applies its own residency tests (where you live, where your home is, how long you’ve been where). Plenty of “Australian” sellers discover at settlement that they’re foreign residents for tax purposes.
2. Applying for the certificate after signing the contract. Standard processing is 28 days. Apply the week you decide to sell, not the week before settlement. The certificate lasts 12 months — there’s no penalty for being early.
3. One certificate for a jointly owned property. Each vendor needs their own. If your spouse’s certificate is missing, 15% comes off their share.
4. Foreign residents chasing a clearance certificate. Wrong document. You need a variation notice — and you need it before settlement.
5. Assuming the 15% is the final tax. It’s a credit. Residents who had 15% withheld on a modest gain, and foreign residents with carried-forward losses, are often owed most of it back — but only if they lodge and claim it.
6. Reporting the credit at the wrong label. The withheld amount goes at the specific withholding-credit label, not at the Foreign Income Tax Offset question. Get it wrong and your refund stalls.
7. Assuming cheap properties are exempt. The $750,000 threshold died on 1 January 2025. A $420,000 regional unit is fully in scope now.
8. Forgetting the non-arm’s-length rule. Selling to your kids at a discount? The 15% is calculated on market value, not your bargain price.

Tips to keep the full sale price

• Residents: apply for the clearance certificate the moment you decide to sell. Free, online, 12 months’ validity, and it costs you nothing to hold one early.
• Get your tax records current first. Unlodged returns and name/address mismatches are the top reasons applications stall. Fix them before you apply, not after the buyer starts asking questions.
• Foreign residents: model the variation numbers with an accountant before settlement. If your real tax is 4% of the price, there’s no reason to let 15% sit with the ATO for a year.
• Everyone: keep the payment confirmation from the purchaser in your tax file. You’ll need it to claim the credit — and chasing it months later is miserable.
• Check the residency question honestly before you apply for anything. The ATO confirms residency during certificate processing; a wrong guess costs you the 28 days.
• Model the whole sale — gain, discount eligibility, withholding, and timing — with our CGT calculator and the capital gains tax on property guide before you sign.

Frequently asked questions

I’m an Australian citizen living overseas. Does FRCGW apply to me?

Possibly — and this is the single most common confusion. The test is tax residency, not citizenship. If you’ve been living overseas permanently, you’re likely a foreign resident for tax purposes even with an Australian passport. That means no clearance certificate for you (you can’t get one), the buyer withholds 15%, and you may need a variation. Check your residency status before the sale, not after.

My partner and I own the property 50/50. We have one clearance certificate between us — is that enough?

No. Each vendor needs their own certificate. With only one certificate, the buyer must withhold 15% on the other owner’s half of the price. If you’re selling a $800,000 property jointly and only one certificate exists, $60,000 gets withheld on the uncovered half. Apply for both at the same time.

How long does a clearance certificate take, and when should I apply?

The ATO’s standard processing time is 28 days, and delays are common when tax records aren’t current. Since the certificate is valid for 12 months, the right time to apply is as soon as you decide to sell — ideally before the property is even listed. It’s free, so there’s no reason to wait.

Can the 15% be reduced if my actual tax will be lower?

Yes, for foreign-resident sellers: apply for a variation notice before settlement. The ATO can set any rate from 0% to 14.99% based on your estimated actual liability. This is the right tool if you’ll make a small gain or a loss, have capital losses to carry forward, or the full withholding would cause hardship. Australian residents don’t need a variation — the clearance certificate avoids withholding entirely.

Does the 15% come back automatically?

No — nothing is automatic. You must lodge an Australian tax return for the year of sale, declare the capital gain or loss, and claim the withholding as a credit at the correct label. If the withheld amount exceeds your actual tax, the excess is refunded. Keep the purchaser’s payment confirmation; without it, claiming the credit is painful.

Does FRCGW apply to commercial property or shares, not just houses?

Yes. The regime covers vacant land, commercial buildings, farms, mining rights, and leases — plus indirect interests like shares or trust units where the value is principally derived from Australian real property. Since 1 October 2026 the definition of taxable Australian real property is broader still. If you’re selling anything connected to Australian land, assume the regime applies until you’ve confirmed otherwise.

The bottom line

Foreign resident capital gains withholding is a cash-flow event, not a tax event — but the cash-flow hit is real. Since 1 January 2025, 15% of every Australian property sale goes to the ATO at settlement unless the seller does the paperwork first. For residents, that paperwork is a clearance certificate: free, online, valid 12 months, one per vendor. For foreign residents, it’s a variation notice based on the real numbers.

The biggest losses don’t come from the 15% itself — they come from surprises: discovering you’re a foreign resident for tax purposes at the settlement table, finding out one joint owner’s certificate doesn’t cover both of you, or learning the hard way that the main residence exemption left with your residency in 2020. Get the certificate, get the variation, or get the refund — but whatever you do, don’t ignore the paperwork and hope for the best. If you’re weighing a sale, start with the CGT calculator and our foreign income tax guide to see the full picture before you sign.