By Tina Zawila
Welcome to 2025! You’ve got to love the vibe of a new year, a fresh start, new opportunities, and sometimes new rules to follow.
In the world of finance and taxation, we are accustomed to constant changes. One significant change starting from 1 January 2025 is within Australia's Foreign Resident Capital Gains Withholding (FRCGW) regime. Before you stop reading, even if you are not a foreign resident, this could still affect you.
From 1 January 2025, two key changes to the FRCGW regime will impact all property sale transactions, including Australians buying or selling a family home:
Increased Withholding Rate: The withholding rate will rise from 12.5% to 15%.
Removal of Value Threshold: The $750,000 property value threshold will be eliminated, extending the withholding obligation to all property sales, regardless of value.
The FRCGW regime ensures tax compliance by foreign residents disposing of Australian property. However, it also affects Australian residents.
Previously, the $750,000 threshold meant that many property transactions were excluded from the regime. However, from 1 January 2025, Australian sellers must obtain a clearance certificate for any property sale (regardless of value) to prevent the purchaser from withholding 15% of the sale price. Without this certificate, the withheld amount will be remitted to the ATO, and the seller can only recover it after lodging their next income tax return.
By way of example, if you are selling the family home for $600,000, and you do not provide an ATO clearance certificate to the purchaser before settlement, $90,000 in tax could be withheld from the sale proceeds you receive. This could have a big impact on your ability to pay off a mortgage or buy your next property, especially if you have to wait until the following July to lodge your income tax return to receive a refund of the tax withheld.
Most clearance certificates are issued by the ATO within a few days, but some may take up to 28 days. They are valid for 12 months, so if you are thinking of selling, apply for the certificate early, even before listing the property for sale.
If you need assistance with any taxation matter, please contact the professional team at UHY Haines Norton CQ on 07 4972 1300.
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