A foreign resident capital gains withholding clearance certificate is a free document from the ATO confirming that a vendor is an Australian resident for tax purposes, so the purchaser does not have to withhold 15% of the sale price at settlement.
The name is misleading, and it costs people money every week. It sounds like something only foreign sellers deal with. The opposite is true. The certificate is the document an Australian resident vendor needs in order to be paid in full.
For any contract signed on or after 1 January 2025 there is no value threshold. The rate is 15%. Every sale of Australian real property is in scope, from a $9,000,000 waterfront to a $310,000 unit.
What the purchaser withholds depends on which document reaches them before settlement.
Why an Australian resident needs one
The default position in the law is that the purchaser withholds. The certificate is what switches that default off.
Without a valid certificate handed over at or before settlement, the purchaser must withhold 15% of the sale price and pay it to the ATO. That applies even where the vendor is plainly an Australian resident, was fully entitled to a certificate, and simply did not get one in time.
The money is not lost. It is a credit, claimed in the tax return for the income year the contract was signed. But the vendor waits until that return is lodged and assessed, which can be many months. On a $700,000 sale that is $105,000 sitting with the ATO instead of funding the next purchase.
What it costs and how long it takes
Nothing, and usually a few days.
Clearance certificates are free. You can apply before you sign a contract, before you list, as soon as you start thinking about selling. Most issue within a few days. Some take up to 28 days, and the ATO asks that applications be lodged at least 28 days before settlement.
Processing runs longer when the vendor has not lodged income tax returns recently, when residency status has changed, when the name on ATO records does not match the Certificate of Title, or when the property sits inside a complex entity structure.
A certificate is valid for 12 months from its date of issue, provided residency status does not change in that period. If you get one and then decide not to sell, nothing happens. There is no obligation to use it.
Each vendor on the title needs their own
This is the single most common failure. Two names on the title means two applications and two certificates, processed separately and often issued on different days.
If one certificate arrives and the other does not, the purchaser withholds 15% of the missing vendor’s share only. On a $600,000 property held 50/50, that is $45,000 held back from one half and nothing from the other.
The name has to match the Certificate of Title
The first and last names on the certificate must match the property title for a purchaser to accept it. Middle names do not need to be supplied or matched. Titles and honorifics do not need to match either.
If the vendor’s name has changed, update the name with the ATO before applying. Where the certificate has already issued under a former name, supply the purchaser with both the certificate and proof of the name change, such as a marriage certificate or a change of name certificate from an Australian state or territory registry. The ATO does not reissue certificates for that kind of mismatch.
Who can apply on the vendor’s behalf
Vendors, legal practitioners, registered tax agents, conveyancers, real estate agents and solicitors acting for the vendor can all lodge the application.
Conveyancers, real estate agents and others charging a fee who are not legal practitioners or registered tax agents should have the vendor complete and sign the paper application, then use those details to complete the online form.
Foreign residents cannot get one
A foreign resident vendor is not entitled to a clearance certificate. There is no version of the form that helps them.
What they can apply for is a variation notice, which asks the ATO to reduce the withholding rate below 15%. The notice specifies the rate, anywhere from 0% to 14.99%. Grounds include there being no capital gain on the transaction, a rollover applying, capital losses reducing the gain, or a mortgagee’s security being defeated by the withholding.
Variations take time as well. Late applications are a well documented cause of delayed settlements, so the 28 day rule applies here with even more force.
Trusts, companies and super funds
The entity holding legal title applies. In most cases that is the trustee, applying in its own capacity as a company or an individual, using the trustee’s tax file number or ABN.
The name on the Certificate of Title and the name on the clearance certificate have to match, which is why title wording like XYZ Pty Ltd as trustee for the ABC Trust needs checking early rather than the week before settlement. For a consolidated group, the ATO issues the certificate to the head company with group members attached, though subsidiaries can also apply in their own right.
When no certificate is needed at all
- A transfer on relationship breakdown under the Family Law Act 1975, where the transferee holds the documentation specified in subsection 126-5(1) of the ITAA 1997 by the time of transfer.
- A deceased estate property passing to a beneficiary under the will, to a surviving joint tenant, or to the legal personal representative.
- A vendor that is an income tax exempt entity with a private ruling for the relevant income year, or a registered charity under item 1.1 of section 50-5 of the ITAA 1997.
- Transactions through an approved stock exchange or a broker operated crossing system, securities lending arrangements, and transactions where the vendor is in external administration or bankruptcy.
What happens on the buyer’s side
The obligation to withhold is the purchaser’s, not the vendor’s. There is no penalty on a vendor for failing to obtain a certificate, because the regime imposes no duty on them to get one.
A purchaser who fails to withhold and pay by settlement may face a penalty equal to 10 penalty units or the amount they failed to withhold. At $364 a penalty unit, 10 units is $3,640. See what is a penalty unit for how that figure moves.
If the ATO later withdraws a certificate because the vendor turned out to be a foreign resident, a purchaser who relied on it in good faith is not penalised for not withholding. The vendor is pursued for a false and misleading statement.
Where this sits alongside the rest of the CGT picture
Withholding is a collection mechanism. It is not the tax. The actual capital gain, the cost base and any discount are worked out in the return, and the amount withheld is a credit against whatever tax is payable. If nothing is payable, the whole amount comes back.
The underlying calculation is set out in how CGT works on property, and the holding costs that feed into it are covered in what is negative gearing. Keep the contract, the certificate and the FRCGW payment confirmation together, on the retention rules in what records to keep for tax.
If you would rather have the CGT position and the withholding credit worked through before you sign rather than after settlement, that is what Tax Assistant is for.
The regulatory detail
Current as at July 2026.
Foreign resident capital gains withholding is imposed by Subdivision 14-D of Schedule 1 to the Taxation Administration Act 1953 (Cth). For contracts signed on or after 1 January 2025 the rate is 15% of the market value of all real property, with no value threshold. From 1 July 2017 to 31 December 2024 the rate was 12.5% on property valued at $750,000 or more. From 1 July 2016 to 30 June 2017 the rate was 10% on property valued at $2,000,000 or more.
Market value is usually the sale price. Where the price was negotiated on a non arm’s length basis, the purchaser must obtain a separate valuation from a professional valuer. The withholding is calculated before adjustments for disbursements such as council rates, water and sewer charges and strata levies.
An Australian resident vendor must give the purchaser a valid clearance certificate at or before settlement. Certificates are free, valid for 12 months from date of issue, and issued in the legal name held in ATO systems. First and last names must match the Certificate of Title; middle names, titles and honorifics are not matched. Most issue within a few days; some take up to 28 days. The ATO asks that applications be lodged at least 28 days before settlement. Each vendor on the title applies separately.
Where the contract period exceeds the certificate’s validity, a purchaser may rely on the certificate provided the date it was made available to the purchaser falls within the certificate period stated on it, and part of that period covers the time the transaction is in effect.
Foreign resident vendors are not entitled to a clearance certificate. They may apply for a variation notice specifying a reduced rate between 0% and 14.99%. Grounds include no capital gain arising, a CGT rollover, reduced income tax liability or available tax losses, and a creditor’s security interest being defeated by the withholding.
Property requiring a clearance certificate includes a home, vacant land, buildings, residential and commercial property, mining, quarrying or prospecting rights situated in Australia, a lease over real property in Australia, and indirect Australian real property interests carrying a right to occupy land or buildings.
Excluded transactions include those conducted through an approved stock exchange or broker operated crossing system, transactions subject to another withholding obligation, securities lending arrangements, and transactions where the vendor is in external administration, bankruptcy, a composition or scheme of arrangement, a debt agreement or a personal insolvency agreement.
A purchaser failing to withhold and pay by settlement may be liable to a penalty equal to 10 penalty units or the FRCGW amount not withheld. At $364 a unit, 10 penalty units is $3,640. The administrative penalty for failure to withhold is in section 16-30 of Schedule 1 to the Taxation Administration Act 1953, with general interest charge under section 16-80. A Commonwealth penalty unit is $364 for offences committed on or after 1 July 2026: section 4AA of the Crimes Act 1914 (Cth).
The Commissioner may withdraw a clearance certificate on establishing that a vendor is a foreign resident. A purchaser who did not withhold in good faith on the strength of the certificate is not subject to a penalty for the failure to withhold; the vendor may be liable for a false and misleading statement.
Transfers on relationship breakdown under the Family Law Act 1975 or a relevant state, territory or foreign law require no clearance certificate and no variation, where the transferee holds the documentation specified in subsection 126-5(1) of the Income Tax Assessment Act 1997 by the time of transfer.
FRCGW is not a final tax. The vendor claims a credit for the amount withheld in the return for the income year the sale contract was signed, and must lodge a return to claim it even if income is below the lodgment threshold. Proof of the amount withheld is the FRCGW payment confirmation obtained from the purchaser.
This article is general information, not advice for a specific transaction.
Frequently asked questions
Why does an Australian resident need a clearance certificate?
Because withholding applies to all property sales unless the vendor produces one. Since 1 January 2025 the rate is 15% and there is no value threshold, so every sale is caught.
How long does a clearance certificate take?
It is free and many issue quickly, but the ATO allows up to 28 days. Apply when you start thinking about selling rather than after the contract is signed.
Does each owner on the title need their own?
Yes. The certificate attaches to the vendor, so every entity on the title needs one. Withholding is calculated on each vendor’s share.
What happens if it is not provided by settlement?
The purchaser has to withhold 15% of the sale proceeds and pay it to the ATO. The vendor recovers it by lodging a return for that income year, which can mean waiting many months.
