New updates to the Capital Gains Withholding (CGW) regime in New South Wales came into effect from 1 January 2025, introducing stricter requirements for property transactions involving foreign residents. These changes will impact both buyers and sellers of real property, making it essential to stay informed.
Key Changes to the CGW Regime
1. Withholding Rate Increase
The withholding rate on the sale of real property by foreign residents has increased from 12.5% to 15% of the sale price. This means a higher portion of the sale proceeds will be withheld and paid to the Australian Taxation Office (ATO) if the seller does not obtain the necessary clearance.
2. Removal of the $750,000 Threshold
Previously, CGW only applied to properties valued above $750,000. From 1 January 2025, this threshold will be removed, meaning all property sales, regardless of value, are now subject to withholding if the seller is a foreign resident.
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What This Means for You
If You Are Selling Property
- You must apply for a Foreign Resident Capital Gains Withholding (FRCGW) Clearance Certificate, regardless of your property’s value.
- This certificate must be provided to the buyer before settlement to avoid the 15% withholding.
- Your conveyancor and / or accountants can assist you in obtaining this certificate to ensure compliance and prevent unnecessary withholding.
If You Are Buying Property
- You must ensure that the seller provides a valid FRCGW Clearance Certificate before settlement.
- If the seller does not provide this certificate, you are required to withhold 15% of the sale price and remit it directly to the ATO.
- Failure to comply with these requirements could result in penalties and legal complications.
About Chan & Naylor
Since 1990, Chan & Naylor has partnered with business owners and property investors in managing their taxes and building a tax-effective wealth. Choosing Chan & Naylor means you’re not just selecting a service provider; you’re gaining a partner aligned with your financial goals. You’ll have access to a dedicated client manager supported by a team of accountants that specialises in business and property tax. Contact us today so we can discuss how we can help you.
Disclaimer
This article serves as general information only and may not account for the unique circumstances of individual readers. For personalised and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customised tax planning for your property investments.
