FRCGW Clearance Certificate Guide for Melbourne Buyers

By Pearson Chambers Conveyancing.
Published 29th April 2026

We get asked about FRCGW more and more by Melbourne buyers who are already juggling finance, auctions, building reports and settlement funds. It usually starts with one confusing line on the settlement statement: a possible 15 per cent payment to the ATO.

The short answer: From 1 January 2025, foreign resident capital gains withholding applies to every Australian property sale, regardless of price. The rate is 15 per cent of the contract price, or market value if the transfer is not at arm's length. If the vendor does not give the buyer a valid ATO clearance certificate at or before settlement, the buyer must withhold that amount and pay it to the ATO.

What is FRCGW in a Melbourne property purchase?

FRCGW is a federal tax collection rule that can affect every Victorian contract of sale. It sits in Subdivision 14 D of Schedule 1 to the Taxation Administration Act 1953 and is designed to help the ATO collect tax from foreign residents who sell Australian property.

Before 2025, many Melbourne first home buyers barely saw it. The old rules only applied once the property value reached $750,000, with withholding at 12.5 per cent. That meant a buyer purchasing a smaller apartment in Footscray or a unit in Reservoir might never have heard of it.

For contracts signed on or after 1 January 2025, that has changed. The $750,000 threshold is gone and the rate is now 15 per cent. That means FRCGW must be checked whether you're buying a $520,000 apartment, a townhouse in Coburg, or a family home in Glen Waverley.

If you're arranging first home buyer conveyancing in Melbourne, this is now one of the early settlement questions to ask, not something to leave until the last few days.

Why does a foreign resident tax affect Australian buyers?

The buyer carries the withholding duty, even when the vendor says they are an Australian resident. The system starts from a simple position: unless the vendor proves their Australian tax residency with a clearance certificate, the buyer must withhold.

That surprises people. A buyer might think, 'I know the seller lives in Melbourne, so why would I withhold?' The answer is that the ATO does not rely on a handshake, the agent's comments or the vendor's address in the contract. It relies on the clearance certificate.

In our practice, we've seen this come up when a contract had two registered proprietors on title, but only one clearance certificate had been ordered. We've also seen certificates arrive in an old name after marriage, or expire just before settlement. Small details can create a very large settlement problem.

A careful contract review should check the FRCGW position alongside the essential clauses in a Victorian contract of sale, finance conditions, settlement date, GST treatment and special conditions.

How does the vendor get an FRCGW clearance certificate?

An Australian resident vendor applies to the ATO online, and there is no application fee. The certificate confirms the vendor is an Australian resident for tax purposes, so the buyer does not need to withhold FRCGW at settlement.

Most certificates are issued quickly, but ATO guidance allows up to 28 days. The certificate lasts for 12 months from the date it is issued, so vendors do not need to wait until a contract is signed. A seller preparing for a spring auction campaign can apply before the listing goes live.

The name on the certificate matters. Each vendor on title needs their own certificate, and the name should match the title. If the property is owned by a company, trust, estate, trustee or executor, the certificate needs to match the correct legal party.

Buyers should ask their conveyancer to check:

the certificate covers every registered proprietor
the name or entity details match the title
the certificate remains valid on settlement day
the certificate was issued by the ATO
no variation notice is needed for a foreign resident vendor

What happens at settlement if there is no clearance certificate?

If there is no valid clearance certificate, 15 per cent of the price is redirected to the ATO at settlement. The buyer's conveyancer usually handles the process through the ATO payment notification and the electronic settlement workspace.

For example, if you're buying a Brunswick apartment for $720,000 and the vendor gives no valid certificate, the withholding amount is $108,000. That money does not go to the vendor at settlement. It is paid to the ATO, and the vendor receives the balance.

The buyer's conveyancer will generally need to:

Lodge the ATO purchaser payment notification.
Obtain the payment reference number.
Add the ATO payment line into the settlement workspace.
Make sure the 15 per cent amount is paid correctly at settlement.

This is why settlement statements need a careful read. FRCGW can sit beside rates, water, owners corporation fees, land tax adjustments, registration fees and other hidden transfer fees on a settlement statement. It is not a fee charged by your conveyancer. It is a statutory withholding amount.

What if the vendor is a foreign resident?

A foreign resident vendor cannot use an Australian resident clearance certificate. They may be able to apply to the ATO for a variation notice, which can reduce the withholding rate where the full 15 per cent does not match the likely tax payable.

A variation notice needs to be issued before settlement. If a foreign resident vendor says withholding should be lower, the buyer should not rely on emails, tax estimates or verbal comments. The reduced rate must come from the ATO notice.

For buyers, the practical rule is simple: no valid clearance certificate, no valid variation notice, no shortcut. The withholding position must be dealt with before settlement funds are released.

What happens if the buyer fails to withhold?

A buyer who should have withheld but did not can be personally liable to the ATO. This is the risk that makes FRCGW more than a paperwork issue.

On a $720,000 purchase, failing to withhold could leave the buyer exposed to the missing $108,000. The buyer may then have to pursue the vendor privately, which can be difficult if the vendor has already moved funds elsewhere. Penalties and general interest charge may also apply, including an administrative penalty of 10 penalty units.

That is why our buyer checklist now treats FRCGW like finance approval or title matching: it must be checked before funds move. It sits with the other contract traps first home buyers should watch for, especially in fast auction campaigns where buyers feel pushed to sign quickly.

What should Melbourne buyers check before settlement?

Buyers should ask for the clearance certificate early, then have their conveyancer check it against title. Two weeks before settlement is a sensible time to make sure the position is clear.

Use this simple checklist:

Has each vendor supplied an ATO clearance certificate?
Does every certificate match the registered proprietor on title?
Will the certificate still be valid on settlement day?
Is the vendor a company, trustee, executor or other entity?
Has a foreign resident vendor supplied an ATO variation notice?
Has your conveyancer prepared the ATO payment notification if withholding may be needed?

If any answer is unclear, do not wait until settlement morning. FRCGW issues are much easier to fix while there is still time to speak with the vendor's conveyancer, the bank and the settlement platform.

Frequently asked questions

What is an FRCGW clearance certificate, and do I need one as the buyer?

An FRCGW clearance certificate is an ATO document that confirms the vendor is an Australian resident for tax purposes. The buyer does not apply for it; the vendor does. The buyer must receive a valid certificate at or before settlement, or the buyer must withhold 15 per cent and pay it to the ATO.

Why does foreign resident capital gains withholding apply to my Melbourne first home purchase?

Foreign resident capital gains withholding now applies to all Australian property sales unless the vendor provides the right ATO document. From 1 January 2025, the $750,000 threshold was removed and the rate became 15 per cent. This means even lower priced Melbourne apartments and units need an FRCGW check.

How long does an FRCGW clearance certificate take?

Most FRCGW clearance certificates are issued within a few days, but the ATO may take up to 28 days. Once issued, the certificate is valid for 12 months. Vendors should apply early so the certificate is ready before settlement.

What is the FRCGW withholding rate, and what amount is it based on?

For contracts signed on or after 1 January 2025, the FRCGW withholding rate is 15 per cent. It is usually based on the contract price, or market value if the sale is not at arm's length. On a $720,000 contract, the withholding amount is $108,000.

Can the buyer be penalised for failing to withhold FRCGW?

Yes. If a buyer should have withheld FRCGW but pays the full price to the vendor, the buyer can be personally liable to the ATO for the amount that should have been withheld. Penalties and general interest charge may also apply.

Does the FRCGW clearance certificate go in the Section 32 statement?

No. The FRCGW clearance certificate is separate from the Section 32 vendor statement. The Section 32 is a Victorian vendor disclosure document, while the clearance certificate is part of a federal tax withholding process checked before settlement.

My contract was signed in December 2024 but settles in 2025. Which FRCGW rules apply?

The contract date decides which FRCGW rules apply. Contracts signed before 1 January 2025 remain under the previous rules, with the $750,000 threshold and 12.5 per cent rate. Contracts signed on or after 1 January 2025 are under the new 15 per cent rate with no price threshold.

About the Pearson Chambers Conveyancing team

Pearson Chambers Conveyancing is a Melbourne focused conveyancing team helping first home buyers, sellers and investors across Victoria. We review contracts, read Section 32 statements, prepare for PEXA settlement and explain settlement figures in plain English. FRCGW clearance certificates are now part of the day to day settlement checks we run for Melbourne buyers.

Sources we consulted

Need your contract checked before settlement?

If you're buying in Melbourne and want to know how the FRCGW rules affect your contract, Pearson Chambers Conveyancing can help before you sign. We can check the vendor's clearance certificate position, review the Section 32, explain settlement line items and prepare for any ATO withholding step if needed.

Email contact@pearsonchambers.com.au.

General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.