What is the FRCGW Clearance Certificate:
In Queensland property transactions, FRCGW commonly refers to the Foreign Resident Capital Gains Withholding clearance certificate, issued by the Australian Taxation Office (ATO). The Foreign Resident Capital Gains Withholding (FRCGW) clearance certificate is required under Australian tax law when selling property, regardless of the property value (previously the threshold was $750,000). It applies only to vendors (property sellers). This tax measure is designed to ensure that foreign residents meet their capital gains tax obligations when selling their Australian properties. Australian residents for tax purposes must have a valid clearance certificate issued by the ATO before settlement. This certificate confirms the seller is an Australian resident for tax purposes. Sellers of Australian property must provide a valid clearance certificate to the purchaser prior to settlement to avoid withholding. Without this certificate, the purchaser is required to withhold 15% of the purchase price and remit it to the ATO.
✅ If No FRCGW Clearance Certificate:
If the buyer does not receive the clearance certificate before settlement, the buyer is obliged to withhold 15% of the purchase price and remit it directly to the ATO.
Who Applies:
The seller (or their representative) must apply for the FRCGW clearance certificate from the ATO. The application is free and can be completed online via the ATO website. If there are two or more sellers listed as owners, each owner must have their own FRCGW clearance certificate. The processing time can take up to 28 days, so it is advisable to apply well in advance of the settlement date. Once issued, the certificate is valid for 12 months.
Australian Residency eligibility criteria for FRCGW:
Individuals will be considered Australian residents for tax purposes if they:
– Have always lived in Australia, or came to Australia and live here permanently
– Have been in Australia continuously for 6 months or more, and for most of that time, worked in one job and lived at the same place
– Have been in Australia for more than 6 months of the year, unless their usual home is overseas and they don’t intend to live in Australia
– Go overseas temporarily and don’t set up a permanent home in another country
– Are overseas students who came to Australia to study and are enrolled in a course that is more than 6 months in duration
FRCGW Clearance Certificate for Companies:
The Foreign Resident Capital Gains Withholding (FRCGW) regime in Australia applies to all entities, including companies involved in the sale or transfer of taxable Australian property. If a company is a tax resident of Australia, is the legal titleholder of the property, and is planning to sell that property, then it is required to apply for an FRCGW clearance certificate. If the company is a foreign resident for tax purposes, then a clearance certificate is not required, as withholding will apply instead.
Australian Residency for Companies:
A company is considered a resident of Australia if:
– It is incorporated in Australia, or
– Although not incorporated in Australia, it carries on business in Australia and has either:
– Its central management and control in Australia, or
– Voting power controlled by shareholders who are residents of Australia
Company with Foreign Director:
If the company is considered an Australian tax resident and it applies for and obtains a clearance certificate from the ATO, then no withholding is required, regardless of the residency status of its directors or shareholders. If a company has both Australian and foreign directors, its tax residency is determined based on factors such as where the company is incorporated, where its central management and control are located, and other relevant circumstances.
Importantly, the residency of individual directors (whether Australian or foreign) does not determine the company’s tax residency. The mere presence of a foreign director does not automatically make the company a foreign tax resident.
Conversely, if the company is considered a foreign resident for tax purposes, the purchaser is required to withhold 15% of the purchase price under the FRCGW regime.
What if the Company is Considered a Foreign Resident?
If the company does not qualify as an Australian resident for tax purposes (for example, its central management and control is overseas), then:
– The buyer must withhold 15% of the purchase price and remit it to the ATO at settlement. This applies to the full purchase price, not just the share “owned” by the foreign director.
🧾 In Summary:
| Scenario | Is FRCGW Withholding Required? |
| Company is Australian tax resident | ❌ No withholding (if clearance certificate provided) |
| Company is foreign tax resident | ✅ Yes – 15% withheld on full price |
| One director is foreign, one is Australian | ✅/❌ Depends on company’s tax residency, not directors’ residency |
At SABDIA LAWYERS, we are committed to helping our clients protect their business interests. Contact SABDIA LAWYERS today for expert legal advice and support to ensure your business meets all legal obligations.
Disclaimer: This guide is intended for educational and awareness purposes only. It should not be considered or construed as legal advice. Legal obligations may vary depending on individual circumstances. For tailored legal advice, please contact SABDIA LAWYERS or a qualified legal expert.