Claiming Credits for Foreign Resident Capital Gains Withholding

additionaccounting
Aug 27
2 min read

If you’ve recently sold a property in Australia and had foreign resident capital gains withholding (FRCGW) applied at settlement, you may be entitled to claim that amount back, but only once you lodge your tax return for the year in which the sale contract was signed.

Here’s what you need to know:

Why the FRCGW was withheld

The FRCGW rules apply when Australian property is sold by a foreign resident, but sometimes, Australian residents also have amounts withheld accidentally.

This can happen if a vendor’s clearance certificate wasn’t provided to the purchaser at or before settlement. The most common reason? Timing. Clearance certificates can take up to 28 days to process and issue, so allowing enough time before settlement is crucial.

Foreign residents, on the other hand, must have FRCGW withheld from their property sale unless they hold a variation notice reducing the rate to nil.

How to claim the Credit Back

If an amount was withheld from your sale, you’ll need to lodge a tax return to claim the credit, even if your total income is below the usual threshold for lodging.

You should have received a payment confirmation notice from the ATO. If not, you can ask the purchaser for a copy of theirs.

When completing your tax return, make sure you:

Declare your assessable income, including any capital gain or loss from the property sale; and
Claim a credit for the FRCGW amount that was withheld from your sale proceeds.

When You'll Recieve a Refund

The FRCGW credit will generally be refunded in full if:

You have no outstanding tax debts;
There’s no capital gains tax (CGT) payable on the property sale; and
If you’re a foreign resident, there’s no other Australian-sourced income to be taxed.

Updated Withholding Rate from 1 January 2025

From 1 January 2025, the FRCGW rate increases to 15%, applying to all property sales, regardless of value. Previously, the rate was 12.5% and only applied to properties valued at $750,000 or more.

Even if you’re entitled to claim back the withheld amount, you may still need to consider capital gains tax (CGT) depending on your circumstances. The ATO’s guide, Avoid these common CGT errors (QC 104035), provides more detail on what to watch for.