Clients subject to the foreign resident capital gains withholding (FRCGW) are required to file a tax return to claim withheld credits, regardless of income level.

The Australian Taxation Office (ATO) has issued a guidance on 18 July 2025, on claiming foreign resident capital gains withholding (FRCGW) as a credit from property sales.

The guidance states that both Australian and foreign resident vendors have had an amount withheld; they are required to lodge a tax return to claim the credit for the withheld amount, even if their income falls below the threshold for lodging a return.

Clients should have received a payment confirmation notice. If not, they are advised to request a copy of the payment confirmation notice from the purchaser.

When completing the tax return, clients must:

  • Declare all assessable income, including any capital gain or loss resulting from the disposal of the asset.
  • Claim a credit for the foreign resident capital gains withholding (FRCGW) amounts deducted from the sale proceeds.

The FRCGW amount will be refunded in full provided the following conditions are met:

  1. There are no outstanding tax debts.
  2. No capital gains tax (CGT) is payable on the sale of the property.
  3. No tax is payable on any other Australian-sourced income (applicable to foreign residents only).

Why an amount may have been withheld from the property sale

Without each vendor’s clearance certificate or variation notice (reducing the rate to nil), the purchaser must withhold an amount at settlement.

The FRCGW rates are:

  • Up to and including 31 December 2024, a rate of 12.5% applies to property valued at AUD 750,000 or more.
  • On and after 1 January 2025, a rate of 15% applies to the value of all property.

Australian residents

Australian residents may have had the amount withheld for not providing the purchaser with a clearance certificate at or before settlement. A common reason is that they did not allow sufficient time for the application to be processed and issued – this can take up to 28 days.

Foreign residents

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