Executive Summary: Since 1 January 2025, Australia’s Foreign Resident Capital Gains Withholding (FRCGW) is 15% of the sale price on every property sale, replacing the old 12.5% rate and $750,000 threshold. Foreign residents can’t get a clearance certificate, only a variation. They also lose the 50% CGT discount (post–8 May 2012 gains) and main residence exemption (contracts from 9 May 2017), with non-resident gains taxed up to 45% and no tax-free threshold.
If you’ve searched this topic and landed on a figure of 12.5%, that number is out of date. It was correct for years, but it changed on 1 January 2025, and the difference isn’t trivial. On a 1.2 million dollar property, it’s the difference between 150,000 dollars and 180,000 dollars sitting with the ATO the moment your sale settles. This is one of those areas where an outdated number doesn’t just mislead you, it materially changes how much cash you actually walk away with at settlement.
This one comes up constantly with the founders we work with who’ve relocated to Dubai from Australia but kept a property back home, an old family home, an investment property, sometimes both. Eventually most people sell. When they do, as a foreign resident, the sale doesn’t work the way it would have if they’d still been living in Australia, and the withholding is only part of the story. Here’s the whole mechanism, properly explained.
The Short Version
Foreign Resident Capital Gains Withholding, FRCGW, is the ATO’s mechanism for collecting a portion of your expected capital gains tax at the moment a property settles, rather than waiting for you to lodge a return.
Since 1 January 2025, the withholding rate is 15% of the sale price, and it applies to every property sale, regardless of value. The old 12.5% rate and the 750,000 dollar threshold that used to exempt smaller sales are both gone.
As a foreign resident, you cannot obtain a clearance certificate, that’s only available to Australian tax residents. Your lever instead is applying for a variation to reduce the withholding rate if 15% clearly overshoots your actual tax liability.
The withholding amount isn’t your final tax bill. It’s collected on account of it. You still lodge an Australian tax return for the year of sale, calculate your actual CGT liability, and get back whatever was over-withheld.
The bigger financial hit for most foreign residents isn’t the withholding mechanism itself, it’s what you’ve lost by the time your actual liability gets calculated: the 50% CGT discount and, if it was ever your home, the main residence exemption, both of which foreign residents are largely denied.
What FRCGW Actually Is
Foreign Resident Capital Gains Withholding isn’t a separate tax layered on top of your capital gains tax. It’s a collection mechanism, introduced in 2016 to make sure the ATO actually gets paid by foreign resident vendors, who are harder to chase down for a tax debt once they’ve settled overseas than an Australian resident would be.
When you sell a property as a foreign resident, the buyer is legally required to withhold a percentage of the purchase price at settlement and remit it directly to the ATO, rather than paying that portion to you. You get the balance. The withheld amount sits with the ATO as a credit against whatever your actual tax turns out to be once you lodge your return for that year.
This applies specifically to Australian real property, which stays inside Australia’s tax net regardless of where you live. Unlike shares in a foreign company or an offshore investment portfolio, which generally aren’t taxable here once you’re a non-resident, Australian real estate is always taxable Australian property, so the CGT liability exists no matter your residency status. FRCGW is simply how the ATO makes sure it collects on that liability at the point of sale, rather than trusting a non-resident vendor to lodge a return afterward and pay up voluntarily.
The Change That Catches People Out
For years, the rule was fairly forgiving in one specific way: the 12.5% withholding rate only applied to properties selling for 750,000 dollars or more, so a lot of smaller sales fell outside it entirely. That changed for contracts signed from 1 January 2025 onward.
The rate increased to 15%, and the threshold was scrapped completely. Every property sale by a foreign resident, regardless of price, is now subject to withholding. A lot of content still floating around, and a lot of people’s mental model of this rule, is still working off the old 12.5% figure and the 750,000 dollar cutoff. Neither applies anymore. If you’re planning a sale, budget on the current 15% figure, on the full sale price, with no exemption for a smaller property.
Why You Can’t Get a Clearance Certificate
This trips people up because the fix that works for Australian residents doesn’t exist for you. An Australian tax resident selling property applies for a clearance certificate from the ATO, confirming their residency status, which stops the withholding from applying at all. It’s free, usually processed within a couple of weeks, and valid for 12 months. As a foreign resident, you’re not eligible to apply for one. Full stop. The certificate mechanism is specifically built around confirming residency, and you don’t have Australian residency to confirm.
Your lever instead is a variation. If you can demonstrate that 15% of the sale price is genuinely more than your actual expected CGT liability, for example if you’re selling at a loss, at a modest gain, or the numbers just don’t support that much being withheld, you can apply to the ATO for a variation reducing the withholding rate, potentially down to 0%. This needs to be lodged and approved before settlement to actually change what gets withheld, so it’s not something to think about the week of your sale. If you’re anticipating a sale in the next 12 months, this is worth getting in front of early.
What You’ve Actually Lost as a Foreign Resident Seller
Here’s the part that matters more than the withholding percentage itself, and it’s often the bigger financial surprise. The withholding is just cash flow, held now, reconciled later. Your actual tax liability is shaped by two concessions that foreign residents largely don’t get access to anymore.
The 50% CGT discount. Australian residents holding a property for more than 12 months generally get to halve their assessable capital gain before tax applies. That discount has been unavailable to non-residents for any gain accrued after 8 May 2012. If you’ve owned the property across both a resident and a non-resident period, the ATO requires the gain to be apportioned, generally on a pro-rata basis by days, so you retain the discount only for the portion of the gain that accrued while you were genuinely an Australian resident. The portion that accrued during your years as a non-resident gets taxed in full, no halving.
The main residence exemption. If the property was ever genuinely your home, you might expect that history to shield at least part of the gain. Since rules that took effect for contracts signed on or after 9 May 2017, foreign residents at the time of sale are generally denied the main residence exemption entirely, regardless of how long they actually lived there before moving overseas.
There are narrow life-event exceptions, things like a terminal medical condition, death, or divorce affecting the vendor or their immediate family within a specific window (broadly, having been a foreign resident for a continuous period of six years or less), but outside those specific circumstances, being a foreign resident at the point of sale is usually enough to lose the exemption completely, not just partially.
Put those two together, and the real number that matters isn’t the 15% withheld at settlement, it’s your full, undiscounted gain for the non-resident portion of ownership, taxed at non-resident marginal rates that run as high as 45%, with no tax-free threshold. For a lot of founders, the withholding at settlement ends up being close to, or sometimes less than, the actual bill once the return is lodged, precisely because these two concessions have quietly fallen away.
Getting Your Money Back
Once your Australian tax return for the year of sale is lodged, your actual CGT liability gets calculated properly, taking into account your cost base, holding period, and whatever discount or exemption genuinely applies. Whatever was withheld at settlement is applied as a credit against that liability.
If the amount withheld was more than what you actually owe, which does happen, particularly if a variation wasn’t sought and 15% genuinely overshot your real liability, you get the difference refunded once the return is processed. If it turns out you owe more than what was withheld, you pay the shortfall. Either way, this only gets resolved through lodging the return for that specific year, not automatically.
A Worked Example
Say you’re a 44-year-old founder who relocated to Dubai four years ago, and you’ve decided to finally sell the Melbourne house you lived in for years before you left, now worth 1.4 million dollars against an original purchase price of 700,000 dollars.
At settlement, because you’re a foreign resident and didn’t seek a variation, the buyer withholds 15% of the sale price, 210,000 dollars, and remits it to the ATO. When you lodge your Australian tax return for that year, because you were a foreign resident at the time of sale, the main residence exemption doesn’t apply despite having lived there for years, and the portion of your 700,000 dollar gain accrued during your four years overseas doesn’t get the 50% discount either.
The result is a real tax liability that, depending on the exact apportionment and your total non-resident income for the year, can land close to or above the 210,000 dollars already withheld, meaning little or no refund, sometimes an additional amount owing.
Compare that to a scenario where you’d sold while still a resident, before your departure, where the exemption and full discount would likely have applied, and the difference in after-tax proceeds can run into six figures. This is exactly the kind of sequencing decision worth modelling properly with an accountant well before you list the property, not after settlement’s already happened.
Where GenZone Fits Into This
The FRCGW mechanics, your variation application, and the actual CGT calculation on your return are work for a registered Australian tax agent, ideally one who specifically handles non-resident property sales, not something we file on your behalf. I’d rather say that plainly than let you assume otherwise.
What we do well is the Dubai side of this, and helping founders think through timing decisions like the one above, alongside your accountant rather than in isolation from them. That includes genuine cross-border coordination, transparent pricing on your UAE company setup, residency, and banking with nothing sprung on you later, and an end-to-end setup handled by one team.
If you’re planning to redeploy Australian property proceeds into Dubai, our real estate division can walk you through investment options here, from off-plan developments to established properties, so the proceeds from an Australian sale have somewhere productive to land rather than sitting idle. Once you’re set up, the same team stays with you for ongoing corporate tax filings and renewals, backed by people who’ve actually walked founders through this exact kind of cross-border property decision before.
If you haven’t already, it’s worth reading our related Australia guides – including what to do with your Pty Ltd when you move to Dubai, how to exit the Australian tax system, and what it actually costs to move to Dubai from Australia – along with our pieces on what happens to your superannuation when you move to Dubai and your HECS-HELP obligations while living overseas, since property, super, and study debt tend to surface together as the three things Australian founders forget are still attached to them after they’ve relocated.
Frequently Asked Questions
What is the current foreign resident capital gains withholding rate in Australia?
Since 1 January 2025, it’s 15% of the sale price, applying to every property sale regardless of value. The previous 12.5% rate and the 750,000 dollar threshold that used to exempt smaller sales were both replaced from that date.
Can I get a clearance certificate as a non-resident to avoid the withholding?
No. Clearance certificates are only available to Australian tax residents. As a foreign resident, your option instead is applying to the ATO for a variation to reduce the withholding rate if 15% clearly exceeds your actual expected tax liability.
Is the 15% withheld the final amount of tax I pay?
No. It’s collected on account of your eventual liability. You still lodge an Australian tax return for the year of sale, your actual CGT is calculated, and you either receive a refund of the excess or pay any shortfall, depending on how the withheld amount compares to your real liability.
Do I still get the main residence exemption if I lived in the property before moving overseas?
Generally no. Since rules affecting contracts signed on or after 9 May 2017, foreign residents at the time of sale are usually denied the main residence exemption entirely, regardless of how long they lived there previously, outside a narrow set of life-event exceptions like terminal illness, death, or divorce.
Do I still get the 50% CGT discount as a non-resident seller?
Only for the portion of the gain that accrued while you were genuinely an Australian resident. Gains accrued after 8 May 2012 during periods of non-residency don’t qualify for the discount, and where ownership spans both periods, the gain is generally apportioned pro-rata by days.
Does FRCGW apply to selling my Dubai property back to an Australian entity?
No, FRCGW is specifically an Australian withholding regime that applies to the sale of Australian real property. It has no application to property located outside Australia.
When should I apply for a variation if I think 15% is too high?
As early as possible, ideally as soon as you know you’re likely to sell, since it needs to be approved before settlement to actually change what’s withheld. It’s not something that can be sorted out after the contract is signed.
