How to Avoid 15% ATO Withholding Tax When Selling Property - Your Guide to the FRCGW Clearance Certificate (2025 Update)

If you’re selling property in Australia in 2025 or beyond, there’s one important document you need to know about: the Foreign Resident Capital Gains Withholding (FRCGW) Clearance Certificate.

Since 1 January 2025, the withholding rate increased from 12.5% to 15%, and it now applies to all property sales — regardless of the sale price. Without a clearance certificate, the buyer is legally required to withhold 15% of the purchase price and pay it directly to the Australian Taxation Office (ATO).

In this guide, you’ll learn:

• What the FRCGW Clearance Certificate is
• How the 2025 changes affect you
• What happens if you don’t have one
• The step-by-step process to apply
• 7 ways to ensure you meet the requirements
• What to do if you don’t qualify

What is the FRCGW Clearance Certificate?

The FRCGW Clearance Certificate is an official document issued by the Australian Taxation Office confirming that you are an Australian tax resident for capital gains purposes.

Why it exists:
The measure was introduced to ensure foreign residents meet their Australian tax obligations when selling property. If a seller is a foreign resident (or fails to prove otherwise), the buyer must withhold a portion of the sale price and remit it to the ATO.

Key details:

• From 1 January 2025:
• Withholding rate = 15% (previously 12.5%)
• Applies to all property sales, regardless of value (previously only $750,000 and above)
• The certificate is free and valid for 12 months from the date of issue.
• You must have it before settlement.

Why the 2025 Changes Matter

Prior to 2025, many lower-value sales were unaffected due to the $750,000 threshold. Now, every property transaction — whether you’re selling a small unit or a multimillion-dollar home — requires attention to the FRCGW rules.

Example:

• Selling price: $800,000
• Without a clearance certificate:
• Buyer withholds 15% = $120,000
• Sent to the ATO at settlement
• You’ll need to lodge a tax return to reclaim it (if eligible), which could take months.

For sellers in markets like Mornington and the Mornington Peninsula, where property values often exceed $600,000, this change impacts almost every sale.

Benefits of Having the Clearance Certificate

1. Keep your full sale proceeds – No money unnecessarily held by the ATO.
2. Avoid settlement delays – Missing certificates can stall the process.
3. Protect your buyer from penalties – If they fail to withhold when required, they face fines.
4. Peace of mind – Certainty that you’ve met your legal requirements.
5. It’s free and quick – No cost to apply; many are approved instantly.

What Happens If You Don’t Have One

If you don’t have a clearance certificate when the contract is signed (or before settlement):

• The buyer must withhold 15% of the total sale price.
• That money is sent to the ATO immediately.
• You can apply for a refund by lodging a tax return, but this can take weeks or months.
• If you’re actually a foreign resident for tax purposes, the amount withheld will go towards your capital gains tax liability.

How to Apply for the FRCGW Clearance Certificate – Step-by-Step

Step 1: Go to the ATO website and search for “Apply for FRCGW Clearance Certificate.”
Step 2: Log in with myGovID (not just myGov).
Step 3: Complete the online form with:

• Full legal name (must match title records)
• Date of birth
• Tax File Number (TFN)
• Property details (address, title reference)
  Step 4: Provide proof of identity (e.g., driver’s licence, passport).
  Step 5: Declare your residency status for tax purposes.
  Step 6: Submit the form.
  Step 7: Provide the certificate to your conveyancer or solicitor before settlement.

Processing time:

• Most are issued instantly.
• If further checks are needed, allow up to 28 days.

7 Ways to Ensure You Meet the Requirements

1. Confirm your tax residency status early – Residency is based on ATO definitions, not just citizenship.
2. Apply before listing your property – Certificates last 12 months, so you can be ready ahead of time.
3. Have your TFN ready – Missing or incorrect TFNs cause delays.
4. Match property details exactly – The ATO cross-checks against the title.
5. Check your name spelling – Even minor differences can delay approval.
6. Respond quickly to ATO requests – Delays answering their queries will hold up your certificate.
7. Engage your conveyancer early – They can coordinate the application and ensure it’s on time.

What If You Don’t Qualify?

If you are considered a foreign resident for tax purposes:

• The buyer must withhold 15% and send it to the ATO.
• You may still be able to apply for a variation notice if your actual CGT liability will be less than 15%.
• Always seek tax advice before listing if you’re unsure about your residency status.

Common Questions

Q: Is the FRCGW Clearance Certificate only for expensive properties?
No. From 1 January 2025, it applies to all property sales, regardless of price.

Q: I’m an Australian citizen — do I still need one?
Yes. The requirement is based on tax residency, not citizenship.

Q: Can my agent or solicitor apply for me?
Yes, they can assist, but the application is in your name.

Tips for Mornington Peninsula Sellers

Selling in Mornington, Mount Martha, Mount Eliza, or across the Peninsula?

• The higher average sale prices mean 15% withholding could be a significant sum.
• Local market conditions often mean quick sales — so having your certificate ready prevents settlement hiccups.
• At McNeill Real Estate, we routinely help sellers secure their clearance certificate as part of our pre-listing checklist.

Key Takeaways

• From 1 January 2025, the FRCGW withholding rate is 15%, with no minimum sale price threshold.
• Apply for your clearance certificate well before settlement.
• Without it, 15% of your sale proceeds will be withheld by the ATO.
• It’s free, quick to apply for, and ensures you keep your funds.

If you’re selling property in Mornington or the Mornington Peninsula, our team can guide you through the entire sales process — including applying for your FRCGW Clearance Certificate.

📞 Contact McNeill Real Estate today to book your no-obligation property appraisal and get your sale off to the best start.