Foreign Resident Capital Gain Withholding
For properties purchased, not settled, after 1st July 2017 that have a contract price of over $750,000 (previously $2,000,000) will be subject to Foreign Resident Capital Gain Withholding (FRCGW).
Purchasers of any properties, whether it be residential or commercial, will have to withhold 12.5% (previously 10%) of the property price from the vendor.
If you are an Australian Resident and you are selling a property and don’t want your money to be withheld from you, you will need to apply for a Vendor Clearance Certificate (VCC) from the ATO stating that you, the owner of the property, are not a relevant foreign resident and present it to the purchaser, in most cases the VCC will be issued fairly quickly and is valid for 12 months.
This ruling applies to everyone in Australia, unless the vendor has presented the VCC, the purchaser has the responsibility to withhold 12.5% from the vendor and pass it to the ATO. If the purchaser fails to do so, the Commissioner may penalise the purchaser for the 12.5%, meaning effectively the purchaser will have to pay the 12.5% on top of the property’s sale price.