Foreign resident capital gains withholding (FRCGW) applies to vendors disposing of certain taxable property under contracts entered into from 1 July 2016.

The FRCGW tax rate is currently 12.5%.

It now applies to real property disposals where the contract price is $750,000 or more.

Historically, for contracts that were entered into from 1 July 2016 and before 1 July 2017, even if they were not due to settle until after 1 July 2017, the FRCGW withholding tax rate was 10% and applied to real property disposals where the contract price is $2 million and above.

Where a vendor enters into a contract on or after 1 July 2017 and disposes of certain asset types (or receives a lease premium for the grant of a lease over Australian real property), it imposes an obligation on purchasers to withhold 12.5% of the purchase price and pay it to Australian Taxation Office.

The foreign resident vendor must lodge a tax return at the end of the financial year, declaring their Australian assessable income, including any capital gain (profit) from the disposal of the asset.

Australian resident vendors can avoid the requirement of the purchaser to withhold the 12.5% by providing one of the following to the purchaser prior to settlement:

  • For Australian real property, a clearance certificate obtained from Australian Taxation Office.
  • For other asset types, a vendor declaration.

 

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