Foreign resident CGT withholding.
Withheld at settlement (15%)
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A withholding tax, not a final tax
Foreign resident capital gains withholding is one of the most misread rules in Australian property. The 15 percent is not your tax bill. It is a deposit the buyer is forced to hold back from the sale price and send to the ATO on your behalf, before you ever see the proceeds. The actual capital gains tax you owe is worked out later on your tax return, and the withheld amount is credited against it. If too much was withheld, you get the difference back; if the withheld figure happens to be less than your real liability, you top it up. This tool shows the cash that disappears at settlement so you are not blindsided at the closing table.
The rules tightened sharply from 1 January 2025. The withholding rate rose to 15 percent and, just as importantly, the old $750,000 property value threshold was removed. That means the obligation now bites on property of any value, not just higher-priced homes. The ATO designed it this way to stop non-residents selling up and leaving the country before settling their tax.
Selling a $900,000 property as a non-resident
Imagine a foreign resident selling an Australian property for $900,000 with no clearance certificate in place. The buyer is legally required to withhold 15 percent and remit it to the ATO. Here is what lands in the seller's account at settlement.
| Item | Amount |
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The sting is that the withholding is charged on the full sale price, not on the gain. Even if the property only rose modestly in value, the ATO still takes 15 percent of the entire $900,000 up front and sorts out the real position later. For a seller whose genuine capital gain was small, that can mean a large refund flowing back many months after settlement. The chart shows how the sale price splits on the day.
The clearance certificate that makes it vanish
Here is the part every Australian resident seller must understand, because the rule now reaches them too. If you are an Australian tax resident selling property, you are not meant to suffer this withholding at all, but only if you hand the buyer a valid ATO clearance certificate before settlement. No certificate, and the buyer is obliged to withhold 15 percent from you anyway, regardless of your residency. Since the threshold was abolished, this catches sellers of even modest homes who never imagined the rule applied to them. The certificate is free, you apply for it through the ATO, and it can take up to 28 days to issue, so the practical advice is blunt: apply the moment you decide to sell, not the week before settlement.
For genuine foreign residents, a different lever exists. If you expect your actual capital gains tax to be far below 15 percent of the sale price, perhaps because the gain is small or losses apply, you can apply for a variation notice asking the ATO to reduce the rate withheld. Without it, you simply wait for the refund after lodging your return.
Who needs to pay attention
This tool matters to two groups. The obvious one is non-residents selling Australian real estate, who should budget for a serious chunk of their proceeds being parked with the ATO. The less obvious group, and the one most likely to be caught out, is Australian residents who assume the rule is somebody else's problem. Both buyers and sellers carry exposure here, because a buyer who fails to withhold when required can be left personally liable for the amount. If you are on either side of a property contract, factor the certificate into your conveyancing checklist.
Is the withholding refundable if I overpaid?
Yes. The 15 percent is only a prepayment. When you lodge your tax return and your actual capital gains tax is calculated, the withheld amount is credited against it, and any excess is refunded. For a seller with a small real gain, the refund can be substantial, though it arrives only after the relevant return is processed, which can be the better part of a year later.
Does the 50 percent CGT discount apply to foreign residents?
Generally no for the period of foreign residency. The 50 percent CGT discount for assets held over twelve months was removed for non-residents on gains accruing after 8 May 2012, with apportionment for periods of residency. This is a key reason a non-resident's eventual tax bill can be higher than a resident selling the identical property, so do not assume the discount will shrink your liability.
Who actually sends the money to the ATO?
The buyer, or more practically their conveyancer or solicitor, withholds the amount from the settlement funds and remits it directly to the ATO. The seller never handles it. This places a genuine compliance duty on the purchaser, which is why buyers now routinely ask sellers for a clearance certificate as a standard condition of settlement.