KEY TAKEAWAYS: A Foreign Resident Capital Gains Withholding Clearance Certificate confirms the seller is an Australian resident for tax purposes. Without a valid certificate, purchasers are required to withhold 15% of the purchase price and pay it directly to the ATO. Your name on the ATO FRCGWC Certificate must match your name on the property title exactly. What Is a Foreign Resident Capital Gains Withholding Clearance Certificate? It is an ATO-issued certificate confirming the seller is an Australian resident for tax purposes, allowing the purchaser to avoid withholding 15% of the sale price at settlement. If you are selling property in New South Wales, one important document you may be asked to provide, or to provide details so your conveyancer can obtain same on your behalf, is a Foreign Resident Capital Gains Withholding (FRCGW) Clearance Certificate. Despite the long name, the purpose of the certificate is relatively straightforward, it confirms to the purchaser that you are an Australian resident for tax purposes so that part of the sale proceeds do not need to be withheld and paid to the ATO at settlement. Many sellers are surprised to learn that this requirement can apply even if they are: Australian citizens; living in Australia; or selling their family home. Understanding how the process works early can help avoid unnecessary delays or withheld funds at settlement. A Deeper Explanation of What it Is A Foreign Resident Capital Gains Withholding Clearance Certificate is issued by the Australian Taxation Office (ATO). The certificate confirms that the seller is not considered a foreign resident for Australian tax purposes. Under Australian tax laws in NSW, purchasers are required to withhold a percentage of the purchase price and pay it directly to the ATO unless the seller provides a valid clearance certificate before settlement. The withholding regime was introduced by the Federal Government to ensure foreign residents meet their Australian tax obligations when disposing of property. Why is the Certificate Required? When selling certain property in NSW, the purchaser is legally required to withhold part of the purchase price at settlement if the seller does not provide a clearance certificate prior to settlement. This applies regardless of whether the seller is actually a foreign resident or not. In practice, most contracts for sale now include provisions requiring the seller to provide the certificate before settlement. Without it, the purchaser may have no choice but to withhold the required amount and pay it to the ATO. How Much Can Be Withheld? Currently, the withholding amount is generally 15% of the purchase price. For example: Sale price: $1,000,000 Potential withholding amount: $150,000 That money is not automatically lost, but it may not be accessible until the seller lodges their tax return and the ATO processes any refund or credit entitlement. This can significantly affect a seller’s cash flow following settlement. Who Needs to Obtain a Clearance Certificate? Australian resident sellers in NSW, or their conveyancer, must obtain a clearance certificate when selling property in NSW. This includes: owner occupiers; investors; Australian citizens; and permanent residents. Importantly, the requirement is based on tax residency, not citizenship. The name on the ATO FRCGWC Certificate must exactly match the name on the title. If your name with ATO is different from that on the title for the property, it is not a valid certificate. Even Australian citizens living overseas may be considered foreign residents for tax purposes depending on their circumstances. When Should Sellers Apply? Sellers should apply for the clearance certificate as early as possible once they decide to sell. Although certificates are often issued quickly, delays can occur if: the ATO requires additional information; there are discrepancies in tax records; or multiple owners are involved. Leaving the application until just before settlement can create unnecessary stress and may risk delayed settlement or withheld funds. How Long is the Certificate Valid? ATO clearance certificates are generally valid for 12 months from the date of issue. This means sellers can often apply before the property is listed for sale. What Happens if there are Multiple Sellers? Where a property has more than one owner, each seller may need to provide their own clearance certificate. For example: spouses selling jointly; or co-owners of an investment property. If one seller fails to provide a certificate, withholding obligations may still apply to that seller’s portion. What If the Seller is Actually a Foreign Resident? If a seller is a foreign resident for tax purposes, they generally cannot obtain a standard clearance certificate. Instead, they may: apply for a variation notice from the ATO; or have withholding deducted at settlement. Specialist accounting and legal advice is usually recommended in those circumstances. Why Your Conveyancer Will Ask About It Your conveyancer or solicitor will usually raise the clearance certificate early in the transaction because: purchasers often require it under the contract; settlement funds can be affected if it is not provided; and delays obtaining the certificate can impact settlement timing. Providing the certificate promptly helps ensure settlement proceeds smoothly. If you are preparing to sell property in NSW, obtaining your FRCGW Clearance Certificate early can help prevent settlement delays and ensure you avoid unnecessary withholding of sale proceeds. 📞 Get in touch with Coutts today to start your buying/selling process with clarity. Schedule an Appointment Now Common FAQs 📌 Who needs a Foreign Resident Capital Gains Withholding Clearance Certificate?Most Australian resident sellers in NSW need one when selling property, including owner occupiers, investors, and Australian citizens. 📌 What happens if I don’t provide a clearance certificate?The purchaser is generally required to withhold 15% of the purchase price and pay it directly to the ATO at settlement. 📌 How long is an FRCGW Clearance Certificate valid for?ATO clearance certificates are generally valid for 12 months from the date of issue. 📌 Does my name on the certificate need to match the title?Yes. The name on the ATO certificate must exactly match the name on the property title for the certificate to be valid. ABOUT KAY VITOGIANNIS: Kay joined the Coutts team in May 2021 working as a Licensed Conveyancer within our Property & Conveyancing team, based in our Narellan office. Kay has over 20 years of experience in the Legal industry. She began her journey in CBD Conveyancing firms as a secretary and attained her Advanced Diploma in Conveyancing in December 2010. For further information please don’t hesitate to contact: Kay Vitogiannis Licensed Conveyancer info@couttslegal.com.au 1300 268 887 Contact Coutts today. This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you. Contact Us