Foreign resident capital gains withholding
The ATO provided an overview of the foreign resident capital gains withholding (FRCGW) changes that took effect on 1 January 2025. It is important to note the definition of a foreign resident for the purposes of FRCGW is different to the definition of a foreign person as defined under the Foreign Acquisitions and Takeovers Act 1975. For further information on residency for taxation purposes in Australia for individuals refer to Taxation Ruling TR 2023/1 Income tax: residency tests for individuals and for corporations refer to Taxation Ruling TR 2018/5 Income tax: central management and control test of residency.
The group discussed a few scenarios including applications to vary the FRCGW rate and when FRCGW applies. Taken on notice were 2 questions around the application of FRCGW to restructures and transfers between related entities and to a subdivision of land.
The ATO has developed a factsheet Selling and purchasing property – capital gains withholdingExternal Link that has also been published in Chinese.
Australia's foreign investment framework changes
From 1 April 2025 to 31 March 2027, foreign persons (including temporary residents and foreign-owned companies) are banned from purchasing established dwellings in Australia.
Limited exceptions apply, including investments that significantly increase housing supply or support the availability of housing supply, and for the Pacific Australia Labour Mobility (PALM) scheme.
Other existing exemptions remain in place, such as for purchases by permanent residents, New Zealand citizens, and spouses of Australian citizens, permanent residents and New Zealand citizens.
Foreign persons who have received approval or applied for approval for an established dwelling before 1 April 2025 will still be able to proceed with their purchase, provided they are eligible, and the correct fee is paid at the time of application. The approval remains valid for the period of time set out in the letter of approval.
The ATO will enhance and expand its existing compliance capabilities to enforce the ban and to target land banking so foreign investors comply with requirements to put vacant land to use.
Firmer action including infringement notices, disposal orders and civil penalty orders will be taken against investors who fail to comply.
Further information on the ban and development conditions is available in guidance note 6, Residential landExternal Link.
New tax conditions guidance note
The government is increasing scrutiny of tax arrangements which pose a risk to revenue to ensure that multinational companies are adhering to Australia's tax laws.
Additional scrutiny and tax conditions will be applied to foreign investment proposals containing certain tax characteristics, particularly those assessed as medium or high risk.
Treasury has published guidance note 12 Tax conditionsExternal Link.