CAPITAL GAINS TAX

FRCGW 2026: Why Every Australian Property Seller Now Needs a Clearance Certificate (Even You)

16 APRIL 2026·11 MIN READ·BY LODGEY

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If you sell any Australian property without a clearance certificate at settlement, the buyer must withhold 15% of the full sale price and pay it to the ATO. That's $150,000 on a $1m sale — locked away for 6–12 months until your tax return processes. The $750,000 threshold is gone. Every sale, every seller.

New Threshold

Was $750,000 before 1 Jan 2025

Withholding Rate

15%

Up from 12.5%

Cert Processing

28 days

Apply free via ATO online

TL;DR — THE KEY POINTS

From 1 January 2025, Foreign Resident Capital Gains Withholding (FRCGW) applies to every Australian real property sale — no minimum value.
The rate jumped from 12.5% to 15%.
Australian residents avoid withholding by lodging a free clearance certificate with the ATO before settlement. It takes up to 28 days.
Without one, your buyer is legally obliged to withhold — and you wait months to claim it back on your return.
A separate April 2026 reform rewrites the foreign resident CGT regime and applies partially retrospective to December 2006. Consultation closes 24 April 2026.

The Change Most Sellers Haven't Caught Up To

FRCGW was introduced in 2016 as a way to stop foreign residents disappearing from an Australian property sale without paying the Capital Gains Tax they owed. The mechanism is simple: if the vendor is (or might be) a foreign resident, the buyer withholds a slice of the sale price and sends it to the ATO on settlement day. Everyone else — actual Australian residents — could opt out by applying for a clearance certificate proving their tax status.

For nine years, this was low-drama. The withholding was only 12.5%, and it only applied to sales worth $750,000 or more. If you were selling a regional home for $540,000, you didn't need to think about it.

On 1 January 2025 that changed.The Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Act 2025 removed the threshold entirely and lifted the rate to 15%. It's now the rule for every property sale in the country — detached house, unit, warehouse, farmland, vacant block. The weird part is how quietly it happened. Many vendors in April 2026 are still assuming the $750K threshold applies.

Rule	Pre-1 Jan 2025	Current (2026)
Withholding rate	12.5%	15%
Value threshold	$750,000+	$0 — every sale
Applies to AU residents?	Only without a clearance cert	Only without a clearance cert
Applies to foreign residents?	Yes, unless variation granted	Yes, unless variation granted
$1m sale withheld (no cert)	$125,000	$150,000
$600K sale withheld (no cert)	$0 (under threshold)	$90,000

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The name is misleading. It's called Foreign Resident Capital Gains Withholding, but the rule affects everyAustralian vendor by default. You're only exempt once you prove you're not a foreign resident — by holding a clearance certificate.

Do You Actually Need a Clearance Certificate?

The rule applies broadly, but a 30-second quiz will tell you exactly where you stand. Answer three questions:

INTERACTIVECLEARANCE CERTIFICATE CHECKSTEP 1

Are you an Australian resident for tax purposes?

See What You'd Lose at Settlement

The withholding is technically a pre-paymentof your tax — you claim it back when you lodge. But the ATO doesn't pay it back at settlement. You wait until your next tax return processes, which typically means six to twelve months of capital sitting in Canberra instead of in your pocket, an offset account, or your next deposit.

Slide the sale price to see how much is at stake — and toggle the clearance certificate to watch it vanish.

INTERACTIVEFRCGW WITHHOLDING CALCULATOR

Property Sale Price ($)

$1,200,000

Clearance Certificate?

If you don't lodge a clearance certificate before settlement, the buyer is legally required to withhold 15% of the full sale price and pay it to the ATO.

OLD RULE (PRE-2025)

$150,000

NEW RULE — WITHHELD

$0

YOU RECEIVE AT SETTLEMENT

$1,200,000

DIFFERENCE

+$-150,000

The withheld amount is a pre-paymentagainst your tax liability — you claim it back on your tax return. But it ties up cash for 6–12 months. On a $1.2m sale that's $180,000 locked away. Getting a clearance certificate before settlement is free and takes about 28 days. Estimate only — verify with a registered tax agent before acting.

How to Apply — Four Steps, Free, 28 Days

A clearance certificate is free. The ATO does not charge for it, and your accountant or conveyancer doesn't need to apply on your behalf (though they can). Most vendors can do it themselves in under 15 minutes through the ATO online form. The only catch is timing — the certificate must be in your hands before settlement, and the ATO can take up to 28 days to issue it.

Apply as soon as you decide to sell

Go to the ATO's Capital gains withholding clearance certificate application onlineform. You can apply up to 12 months before settlement — there's no downside to applying early. Apply the day you sign the listing agreement, not the week before settlement.

Supply your TFN and identity details

You'll need your Tax File Number, date of birth, and the property's title details. If the property is co-owned, each Australian resident vendor needs their own certificate — joint names share one form but multiple names on title need their own applications.

Wait for automatic processing (or a review)

Straightforward applications are processed automatically within days. More complex cases — trust vendors, recent residency changes, outstanding lodgements — get routed to an ATO officer and can take the full 28 days. Lodge early to absorb this.

Give the certificate to your conveyancer

The certificate is valid for 12 months. Forward the PDF to your conveyancer or solicitor as soon as it arrives so they can attach it to the settlement file. That's it — the withholding obligation disappears and you receive the full sale proceeds on settlement day.

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Co-owned property trap. If you and your spouse both appear on title, you each need a certificate. Miss one, and the buyer has to withhold 15% of that person's share. This catches out couples where one partner has spent recent years overseas.

Who Gets Caught Out

The new rule affects the entire selling population, but five groups are disproportionately at risk of being surprised at settlement.

Under the old rules, anyone selling below $750,000 didn't need to think about FRCGW at all — their conveyancer might not have even mentioned it. With the threshold gone, a $480K regional unit now triggers the same paperwork as a $4.8m Sydney townhouse. Conveyancing checklists haven't all caught up.

Estates are one of the most common places clearance certificates get forgotten. Executors are often family members acting in an unfamiliar role and sometimes proceed to settlement without lodging, assuming the deceased's Australian residency is self-evident. It isn't — the ATO still requires the paperwork.

If you've been living overseas for work, you may have lost tax residency without realising. You can't get a clearance certificate as a foreign resident — you have to apply for a variation instead, which requires you to calculate the actual CGT owed on the sale. This is a specialist exercise and should never be DIY.

A mixed couple — one Australian resident, one posted overseas long-term — means one clearance certificate and one variation application. Get only one and the buyer still withholds on the non-resident's share.

Trust-held property requires the trustee to apply for the certificate, not the beneficiaries. SMSFs also need their own certificate. These applications are often routed for manual review, so lodge well before settlement.

The Second Wave: April 2026 Foreign Resident Overhaul

The 15%-on-everything rule is already law. What's new in April 2026 is the draft legislation released on 10 April 2026that rewrites the foreign resident CGT regime itself. If you're a domestic investor this won't hit you directly — but if you sell anything to, or buy anything from, a foreign party, you will need to know what it does.

Change	What It Does
New 'real property' definition	Anything fixed or installed on land for the majority of its useful life — wind turbines, solar farms, battery storage, data centres, heavy machinery — is now TARP for CGT purposes.
Partially retrospective	The new definition applies back to December 2006. Historical transactions previously treated as non-taxable could be revisited.
Principal Asset Test widened	Changes from a point-in-time test to a 365-day lookback for assessing whether a company is 'land rich'.
Pre-transaction notification	Foreign residents must notify the ATO before certain share and interest disposals.
Renewable energy concession	Transitional 50% CGT discount for foreign residents selling Australian renewable energy assets — available for CGT events until 30 June 2030.
Treaty override	Changes override 'real property' definitions in existing tax treaties, potentially denying relief in a broad range of circumstances.

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Consultation closes 24 April 2026. If you hold Australian assets through a foreign structure, this is a short window to submit feedback — and a short fuse before the revised legislation is introduced.

Key Dates

July 2016

FRCGW introduced — 10% withholding, $2m threshold

July 2017

Rate raised to 12.5%, threshold lowered to $750,000

1 January 2025

$750K threshold removed; rate raised to 15% — the change still catching sellers out

10 April 2026

Draft legislation released rewriting foreign resident CGT regime with retrospective reach to 2006

24 April 2026

Consultation closes on foreign resident CGT draft legislation

12 May 2026

Federal Budget — expected CGT discount announcement (separate reform)

30 June 2030

Deadline for transitional renewable energy CGT concession

FRCGW FAQ

These are the questions Lodgey's agent sees most often from sellers in April 2026. They're structured for quick answers — use them as a reference.

Yes — FRCGW is a withholding mechanism, not a CGT calculation. It's triggered by the disposal of real property, regardless of whether the underlying gain is taxable. Main residence sellers still need a clearance certificate to avoid the 15% withhold.

Yes. The ATO does not charge to issue it. Your conveyancer or accountant may charge a small fee for lodging on your behalf, but you can do it yourself online for nothing.

You can apply at any point before settlement, but lodging after contract signing is risky — if settlement is 30 days away, you may not receive the certificate in time. Lodge the moment you list, not the week before settlement.

You can claim the withheld amount back by lodging your next income tax return. It becomes a credit against your liability — or a refund if you have no tax owing. The frustration is the lag: expect to wait 3–9 months depending on when in the financial year you settled.

Each person listed on the property title needs their own clearance certificate — they can't be shared. Lodge one application per Australian resident vendor.

No. A clearance certificate is only available to Australian tax residents. As a foreign resident you'd instead apply for a variation notice, which reduces the 15% withhold if you can demonstrate the actual CGT owed is lower. This requires a cost-base calculation and is almost always done through a registered tax agent.

Yes — to any sale of Australian real property, residential or commercial, improved or vacant. The April 2026 reform goes further and sweeps in fixed infrastructure (wind turbines, solar farms, data centres) attached to land.

The Bottom Line

A clearance certificate costs nothing, takes 28 days at most, and prevents 15% of your sale price being locked away for months. The only way it becomes a problem is if you don't know about it — and with the $750K threshold gone, everybody is now eligible for that problem. Lodge the application the day you sign the listing agreement. There's no reason to wait and every reason not to.

The bigger story — the April 2026 foreign resident CGT overhaul — is a specialist concern, but if you hold Australian assets through any offshore structure, the retrospective reach to 2006 means the draft is worth a careful read before 24 April.

This article is general information only and does not constitute tax advice. FRCGW rules interact with CGT, residency tests, and state-based conveyancing requirements. Get independent advice from a registered tax agent for your specific circumstances.

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Sources

Australian Taxation Office — "Foreign resident capital gains withholding overview" (current)
Australian Taxation Office — "Capital gains withholding clearance certificate application online"
Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Act 2025 — effective 1 January 2025
Clayton Utz — "Sweeping tax changes for foreign residents" (April 2026)
Herbert Smith Freehills Kramer — "Australia's non-resident CGT changes" (April 2026)
PwC Australia — "Draft legislation to strengthen foreign resident CGT regime" (April 2026)
Treasury — "Strengthening the foreign resident capital gains tax regime – draft legislation" (consultation closes 24 April 2026)