When Australian and foreign resident vendors had an amount withheld for foreign resident capital gains withholding (FRCGW) from a property sale, they may be entitled to have it credited back. This can be done when they lodge their tax return for the year the sale contract was signed.
Claiming the credit
If your clients had an amount withheld, they must lodge a tax return to claim the credit that was withheld, even if their income was below the threshold to lodge.
Your client should have received a payment confirmation notice from us. Otherwise, they can ask the purchaser for their copy of the payment confirmation notice.
When completing their tax return:
- declare assessable income, including any capital gain or loss from the disposal of the asset
- claim a Credit for foreign resident capital gains withholding amounts taken from the sale proceeds.
The FRCGW amount will be refunded in full if:
- there are no tax debts
- there’s no CGT payable on the sale of the property
- there's no tax payable on any other Australian sourced income (foreign residents only).
Why an amount may have been withheld from the property sale
Without each vendor's clearance certificate or variation notice (reducing the rate to nil) the purchaser must withhold an amount at settlement.
The FRCGW rates are:
- Up to and including 31 December 2024, a rate of 12.5% applies to property valued at $750,000 or more.
- On and after 1 January 2025, a rate of 15% applies to the value of all property.
Australian residents
Australian residents may have had the amount withheld for not providing the purchaser with a clearance certificate at or before settlement. A common reason is that they did not allow sufficient time for the application to be processed and issued – this can take up to 28 days.
Foreign residents
Foreign residents must have FRCGW withheld from the property sale, unless they have a variation notice reducing the rate to nil.
Capital gains tax (CGT)
Depending on your clients' circumstances, they may still have to consider CGT. For more information see Avoid these common CGT errors.
For more details, see Foreign resident capital gains withholding.