Foreign Resident Capital Gains Withholding: What Every Seller Needs to Know

Foreign resident capital gains withholding sounds like somebody else’s problem. It isn’t, and it trips up Australian sellers far more often than foreign ones.

Since 1 January 2025 it applies to property sales at any price, with no minimum threshold at all. The only thing standing between you and having 15% of your sale price handed to the ATO instead of to you is a free certificate that takes up to 28 days to arrive.

If you’re selling a $600,000 home, that’s $90,000. You get it back, eventually, after you lodge your tax return. But “eventually” is not much help when you’re using the proceeds to buy your next place.

So this is worth ten minutes of your time. The rules themselves are simple, and once you’ve done the one thing this article is really about, you never have to think about it again.

What changed on 1 January 2025

Two things, and both of them matter.

The $750,000 threshold is gone. It used to be that withholding only applied to property valued at $750,000 or more, which meant most sellers in most of the country could ignore it. Now there is no threshold. A $300,000 unit and a $3 million house are treated exactly the same.

And the rate went up from 12.5% to 15%.

The ATO’s rates have moved twice over the life of the scheme:

Contract signed	Rate	Applies to property valued at
On or after 1 January 2025	15%	All property, no minimum
1 July 2017 to 31 December 2024	12.5%	$750,000 or more
1 July 2016 to 30 June 2017	10%	$2,000,000 or more

One detail people get wrong: it’s the date you sign the contract that sets the rate, not the settlement date. A contract signed in December 2024 that settled in January 2025 was still a 12.5% contract.

The 15% is worked out on the property’s market value, which for an ordinary arm’s length sale is simply the sale price. A handful of transactions sit outside the scheme altogether, and there’s a section on those further down.

Why this applies to you even though you’re an Australian resident

The scheme is designed to collect tax from foreign residents who sell Australian property and then leave. Fair enough. The problem is the mechanics: your buyer has no way of knowing whether you’re an Australian resident for tax purposes, and they’re the ones legally on the hook if they get it wrong.

So the law flips the burden. Withholding applies to every sale by default, and you are the one who has to prove you’re an Australian resident by giving your buyer an ATO clearance certificate at or before settlement.

No certificate, no proof. No proof, and the buyer must withhold 15% and pay it to the ATO. That holds true even if you were perfectly entitled to a certificate and simply didn’t get one in time. The ATO is explicit about this: the purchaser must withhold whether or not you were eligible.

It isn’t an extra tax on top of what you’d otherwise pay. It’s money collected up front and credited against whatever capital gains tax you may or may not end up owing, and if you owe nothing, you get all of it back. But you get it back through your tax return, on the ATO’s timetable, not yours.

What it looks like when it goes wrong

The ATO publishes a worked example that’s worth reading closely, because it’s about an ordinary family home rather than a foreign investor’s penthouse.

Willow and Stanley are both Australian residents, and both are on the title. They sell their home for $600,000, signing the contract on 8 January 2025 with settlement 30 days later. They apply for their clearance certificates a week after signing.

Willow’s certificate arrives in time. Stanley’s doesn’t.

At settlement, the buyer withholds 15% of Stanley’s half of the proceeds, which is $45,000, and pays it to the ATO. Willow’s half is untouched, because she handed over her certificate. Stanley waits until his tax return is lodged and processed before he sees that $45,000 again. Had neither of them held a certificate, the full $90,000 would have gone.

Two people, same house, same sale, same settlement date. One piece of paperwork apart.

That example also settles a question a lot of sellers get wrong. Every person named on the certificate of title needs their own certificate. A couple needs two. Yours arriving is only half the job.

How to get your clearance certificate

This is the part to actually do. It’s free, it’s online, and it’s the whole ballgame.

Apply as soon as you’re thinking of selling. You do not need a signed contract, a buyer, or even a listing. The ATO’s own advice is to apply the moment selling crosses your mind.
Apply through the ATO’s clearance certificate application. There’s a paper form too, if you’d rather.
Every owner on the title applies separately. Two names on the title means two applications.
Check your name matches your title. The first and last name on your certificate must match the certificate of title. Middle names and titles like Mr, Ms or Dr don’t need to match. A mismatch is one of the most common reasons an application stalls.
Allow 28 days. The ATO says applications can take up to 28 days and asks you to lodge at least 28 days before settlement. If you leave it late, the ATO can’t guarantee it will be processed in time.
Give it to your buyer before settlement. Not at settlement if you can help it. Send it to your conveyancer or solicitor as soon as it arrives and let them pass it on.

Your certificate is valid for 12 months from the date it’s issued, as long as your residency status doesn’t change in that time, so applying early costs you nothing. If you change your mind about selling, you simply don’t use it.

Who can apply on your behalf

You can apply yourself, and that’s the usual route. Beyond that, only Australian legal practitioners and registered tax agents can lodge on your behalf.

This one surprises people: a conveyancer who isn’t a legal practitioner cannot apply for you. They’re allowed to sit with you and help you fill it in, and many will, but the application has to be yours. If you’re selling privately, don’t assume this is being handled somewhere in the background. Ask your conveyancer directly whether they’re lodging it or whether you are, and get a clear answer.

When you’re a foreign resident

If you’re not an Australian resident for tax purposes, you can’t get a clearance certificate. There’s no way around that.

What you can do is apply to the ATO for a variation, which asks them to reduce the withholding rate. That’s the right move where 15% of the sale price is clearly more than your actual tax liability, most obviously when you’re selling at a loss. If the ATO issues a variation notice, your buyer withholds the amount stated on it instead of the full 15%.

Without a variation, the buyer withholds the full 15% and you recover any excess through your Australian tax return.

The sales where withholding doesn’t apply

A few situations sit outside the scheme entirely, so you don’t want to go chasing paperwork you don’t need.

Relationship breakdowns. Where property transfers from one former spouse to another under the Family Law Act 1975, or an equivalent state, territory or foreign law, withholding is varied to nil, provided the transferee holds the documentation the rollover requires by the time of the transfer.
Most deceased estate transfers. Where a property passes to a beneficiary of the will, to a surviving joint tenant, or to the legal representative, withholding is varied to nil. If the estate sells the property to somebody else, the legal representative does need a clearance certificate.
Bankruptcy and external administration. Sales arising from a bankrupt estate or a vendor in external administration are excluded by the legislation.
Certain income tax exempt entities. A registered charity needs both a private ruling from the ATO confirming its exemption for that income year and documents showing its charity registration.

If any of those describe your sale, get it confirmed by your conveyancer or solicitor rather than assuming. The exclusions are precise and the paperwork required to demonstrate them differs in each case.

What to do if an amount was withheld

If it’s already happened, it isn’t lost. It’s just slow.

You’ll need the payment confirmation from your buyer as proof of the amount withheld. Then, in your tax return, you declare the sale as you normally would and claim the withheld amount as a credit for foreign resident capital gains withholding amounts.

Two things to watch here. First, that credit is not pre-filled, unlike most withholding credits, so you or your accountant have to enter it. Second, you claim it in the tax return for the income year the contract was signed, not the year settlement happened. A contract signed in June 2026 that settles in August 2026 goes in your 2025-26 return.

If you have no tax debts and no CGT payable on the sale, the full amount comes back.

The bottom line

For the overwhelming majority of Australians selling their own home, this whole subject reduces to one sentence: apply for your free ATO clearance certificate the day you decide to sell, and make sure every owner on the title does the same.

Do that and nothing happens, which is exactly what you want. Leave it until you’ve accepted an offer and you’re gambling a 28-day process against a 30-day settlement.

Selling privately doesn’t make any of this harder, but it does mean there’s no agent chasing you about it. That’s a fair trade for keeping the commission, as long as you know the list. This one belongs at the top of it, alongside getting your contract of sale prepared and lining up your conveyancer, and it’s one of the reasons it pays to understand how long a sale actually takes before you start.

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Frequently asked questions

Do I need a clearance certificate if my house is worth less than $750,000?

Yes. The $750,000 threshold was removed on 1 January 2025. Every Australian resident selling any property at any price needs one.

How much does a clearance certificate cost?

Nothing. Applications are free, and there’s no fee for a certificate however many you apply for.

How long does it take?

Up to 28 days. The ATO asks you to lodge at least 28 days before settlement and can’t guarantee processing if you apply close to the date. It’s often quicker, but applications take longer if you haven’t lodged tax returns recently, if your residency status has changed, or if your name doesn’t match the title.

My partner and I own the house together. Do we need one each?

Yes. The certificate is issued to the entity named on the certificate of title, so each owner applies separately. One certificate only protects that owner’s share of the proceeds.

Can my conveyancer apply for me?

Only if they’re an Australian legal practitioner or a registered tax agent. A conveyancer who is neither can help you complete the application, but cannot lodge it on your behalf. Ask yours which applies before you assume it’s covered.

What happens if the certificate arrives after settlement?

Too late for the sale itself. The buyer will already have withheld 15% and paid it to the ATO, and you recover it through your tax return for the income year the contract was signed.

Does this mean I have to pay capital gains tax on my home?

No, and the two things are separate. Withholding is a collection mechanism: the amount withheld is credited against whatever you owe, and it applies regardless of whether you’ll end up owing any CGT at all. Whether CGT applies to your sale depends on your own circumstances, and that’s a question for a registered tax agent.