The property landscape in Australia is set to undergo significant changes with the proposed amendments to the Foreign Resident Capital Gains Withholding (FRCGW) regime and the introduction of a temporary off-the-plan stamp duty concession. These reforms, announced by Treasury and the Victorian government respectively, aim to refine property transaction processes while addressing evolving market conditions.

Proposed changes to Foreign Resident Capital Gains Withholding

FRCGW applies to vendors disposing of certain taxable property under contracts entered into from 1 July 2016. It applies to real property disposals where the contract price is $750,000 or more. A vendor must provide a FRCGW clearance certificate to avoid having 12.5% of the property value being withheld by the purchaser and remitted to the ATO at settlement.

The Treasury is proposing to amend the FRCGW regime. The key changes proposed include:

• Removal of $750,000 threshold: all vendors in Australia are required to provide a clearance certificate to the purchaser, demonstrating that they are not foreign, irrespective of the value of the property, removing the minimum threshold of $750,000.
• Increasing the withholding rate: If the clearance certificate is not provided, the purchaser must remit 15% of the property value to the ATO on settlement, instead of the rate of 12.5%.

If enacted, the amendments will take effect on 1 January 2025 or the date on which the relevant legislation receives Royal Assent

Temporary off-the-plan stamp duty concession

As announced by the Victorian premier on 21 October 2024, temporary off the plan duty concession will apply to any contracts that are entered into on or after 21 October 2024, and before 21 October 2025, to the purchase of dwellings (apartments or townhouses) within strata off-the-plan.

This concession will:

• allow the purchaser to deduct the construction costs incurred on or after the contract date when determining the dutiable value of the purchaser’s property.
• be available to all purchasers, including investors, companies and trusts. The purchaser need not be eligible for either the principal place of residence duty concession or the first home buyer duty exemption or concession.
• only apply to general land transfer duty liability.  Foreign purchaser additional duty will still apply if the purchaser is a foreign purchaser.

More information on the temporary concession is available here.