Foreign resident CGT withholding: the 15% rule and clearance certificates in 2026
Why every Australian property seller needs an ATO clearance certificate since 1 January 2025, how the 15% withholding works, variations for foreign residents and worked examples.
For contracts signed from 1 January 2025, foreign resident capital gains withholding (FRCGW) applies to every sale of Australian real property, at any price, at a rate of 15%. Before then it applied only to properties worth $750,000 or more, at 12.5%. The rule matters to Australian residents too: unless the seller gives the buyer a valid ATO clearance certificate at or before settlement, the buyer must withhold 15% of the price and pay it to the ATO. On a $700,000 sale that is $105,000 held back. Australian residents can apply for a clearance certificate online for free; it is usually valid for 12 months. Foreign residents cannot get a clearance certificate but can apply for a variation to reduce the amount withheld.
This guide is part of the cost of selling a house in Australia section. Use the withholding calculator to see the effect on your settlement.
How the rules changed
| Contracts signed | Threshold | Rate |
|---|---|---|
| 1 July 2017 to 31 December 2024 | $750,000 or more | 12.5% |
| From 1 January 2025 | None: all real property | 15% |
The rate is applied to the purchase price, or market value if the sale is not at arm's length. It is not a final tax. It is a prepayment that the seller can claim as a credit in their tax return.
Australian resident sellers: get a clearance certificate
- Apply early. Apply through the ATO online form as soon as you decide to sell. The ATO says most applications are processed quickly, but some take longer when it needs to check residency.
- Give it to your conveyancer. The certificate covers all sales you make in its validity period, usually 12 months, so one certificate can cover several sales.
- Check it is current at settlement. It must be valid when the buyer receives it, which must be at or before settlement.
Conveyancers commonly ask for the certificate when they prepare the contract. If it is missing on settlement day, the buyer's representative will withhold 15% as the law requires.
What happens if you forget
Illustrative sale of a $900,000 home with a $450,000 mortgage and $20,900 of commission:
| With clearance certificate | Without clearance certificate | |
|---|---|---|
| Price | $900,000 | $900,000 |
| Withheld for the ATO | $0 | $135,000 |
| Mortgage payout | $450,000 | $450,000 |
| Commission | $20,900 | $20,900 |
| Left for the seller at settlement | $429,100 | $294,100 |
An Australian resident who suffers withholding gets the $135,000 back only as a credit when they lodge their tax return for the year, less any tax they owe. For a seller who needs the money for their next purchase, that delay can be serious.
If the mortgage is larger than the proceeds after withholding, settlement can fail: the lender will not release the mortgage until it is paid. For example, a $900,000 sale with an $800,000 loan leaves $900,000 - $135,000 = $765,000, not enough to discharge $800,000.
Foreign resident sellers
A foreign resident cannot get a clearance certificate. The buyer withholds 15% unless the ATO issues a variation notice with a lower rate, for example because:
- The seller will make a capital loss or a small gain
- The seller has carried-forward capital losses
- A mortgage payout means there are insufficient proceeds to pay 15%
Apply for the variation well before settlement and give the notice to the buyer. The foreign resident must still lodge an Australian tax return reporting the gain. Remember that foreign residents generally cannot claim the main residence exemption or the 50% discount on growth after 8 May 2012, and the cost base indexation that replaces the discount for Australian residents from 1 July 2027 is not available to foreign or temporary residents (Tax Reform No. 1 Act 2026): see the main residence exemption.
Buyer obligations
The buyer, usually through their conveyancer, must:
- Withhold the amount unless given a valid clearance certificate or variation
- Lodge a purchaser payment notification with the ATO
- Pay the amount to the ATO at or before settlement
A buyer who fails to withhold can be liable for the amount plus penalties. That is why conveyancers apply the rule strictly. A legislative instrument covers a few transactions where no certificate is needed; your conveyancer can tell you whether one applies.
Related rules not to confuse
- GST withholding applies when buying new residential premises or potential residential land from a developer: the buyer withholds 1/11 of the price, or 7% where the margin scheme applies. It has nothing to do with residency.
- Foreign buyer duty surcharges are state taxes paid by foreign buyers: see foreign buyer surcharges and the ban.
Frequently asked questions
Do I need a clearance certificate for a $400,000 unit?
Yes, for contracts from 1 January 2025. There is no longer any price threshold.
Does the clearance certificate cost anything?
No. The ATO does not charge for it. Some conveyancers apply on your behalf, and may include that in their fee.
Can I apply after the contract is signed?
Yes, you can apply at any time before settlement, but leave enough time for processing. If it is not ready by settlement, the buyer must withhold.
I am an Australian working overseas. Am I a foreign resident?
Possibly. Tax residency is tested under tax law, not citizenship or visa status. The ATO confirms your residency status when you apply for a clearance certificate. If you are a foreign resident for tax, a variation is the only way to reduce withholding.
Official sources
- Australian Taxation Office — foreign resident capital gains withholding, clearance certificate application and variations
- Federal Register of Legislation — Taxation Administration Act 1953, Schedule 1, Subdivision 14-D
