Advisory Board
From April 2025, foreign individuals can no longer purchase established homes in Australia, while capital gains withholding has increased to 15%, with no minimum price threshold. New South Wales and Queensland have also raised their foreign buyer surcharges, adding further complexity and cost to cross-border transactions.
Three months on, the impacts on transactions are gradually becoming apparent. For real estate agents and buyer’s agents, staying across these changes isn’t optional – it’s essential to protect your clients, your deals and your compliance obligations.
temporary ban on foreign buyers of established homes [April 2025 – March 2027]
what’s changed?
From 1 April 2025 to 31 March 2027, overseas buyers including temporary residents and foreign-owned companies, cannot buy existing residential properties unless they fall into one of a few narrow exceptions [e.g. significant redevelopment, PALM scheme, permanent residents/NZ citizens].
If the foreign buyers fall under any of these exceptions, they must apply to the Foreign Investment Review Board [FIRB] for approval, which is not guaranteed.
why it matters?
This aims to free up around 1,800 homes a year for local buyers.
what you [agents] can do
Pre-screen overseas buyers carefully. To avoid getting anyone’s hopes up, ensure all parties understand that most foreign buyers will not be eligible to purchase established homes during the ban period, FIRB approval is only available in limited circumstances.
Even where an exemption may apply, buyers must still meet strict conditions and follow the FIRB application process.
Foreign Resident Capital Gains Withholding [FRCGW] – now 15%, no threshold
From 1 January 2025, the FRCGW rate jumped from 12.5% to 15%, and the previous $750,000 contract price threshold was scrapped. See Chris Burling’s blog here.
critical requirements to help you pre-screen:
- Buyers must verify the vendor’s tax residency status;
- Unless the vendor provides an ATO clearance certificate, the buyer must withhold 15% of the sale price at settlement; and
- Even vendors who are an Australian resident need this certificate to avoid automatic withholding for peace of mind.
higher stamp duty and land tax for foreign buyers in NSW + QLD
Australia has made foreign purchases increasingly prohibitive through taxes and charges. Foreign buyers now face hefty surcharges on purchase and holding costs that locals do not.
| State | Stamp Duty Surcharge | Land Tax Surcharge | Effective |
|---|---|---|---|
| New South Wales | 9% (was 8%) | 5% (was 4%) | From 1 January 2025 |
| Queensland | 8% (was 7%) | 3% (was 2%) | From 2 July 2024 |
what it means for price estimates
Foreign buyers now face noticeably higher upfront costs.
If you’re a buyer’s agent, you should build these into your calculations early to ensure your client understands their full financial commitment.
If you’re a property sales agent, it doesn’t hurt to ask the buyers if they’re aware of the potential costs and encourage them to seek expert advice.
what this means for real estate + buyer’s agents
1. conduct screening of potential buyers
The definition of a ‘foreign person’ under FIRB and ATO rules can be complex. Don’t rely solely on client declarations. You should establish residency status early on to determine eligibility for established property purchases.
2. make buyers and sellers aware of capital gains withholding requirements
From 1 January 2025, the 15% withholding obligation applies to all real property transactions involving foreign vendors, regardless of price. Sellers should obtain clearance certificates well in advance of settlement and buyers should be proactive in following up for a copy of the certificate to avoid unnecessary delays or withholding errors.
3. incorporate all applicable surcharges into cost estimates
Foreign purchasers in jurisdictions such as New South Wales and Queensland may now face significant stamp duty and land tax surcharges. These additional costs should be factored into transaction advice and financial modelling at the pre-contract stage.
5. maintain comprehensive documentation
Clearance certificates, FIRB approvals and evidence of withholding remittance should be collected and retained for every transaction involving a foreign party. Regulators, including the ATO are actively auditing these matters and accurate records are essential to demonstrate compliance.
6. communicate tax implications clearly and early
Clients should be fully informed of the federal restrictions on established dwellings, increased tax withholding obligations, and ongoing holding costs associated with foreign ownership. If in doubt, encourage them to seek advice before proceeding.
we’re here to help
If you’d like some clarity around how the new rules might affect your business and your clients, reach out to our team of Accounting and Tax experts on 1300 BDEPOT or oneplace@businessdepot.com.au.
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