What to Know About Australia's Foreign Resident Capital Gains Tax
Australia has delayed the implementation of stricter capital gains tax rules for foreign residents, providing a temporary reprieve for expats holding Australian assets.
What to Know About Australia's Foreign Resident Capital Gains Tax
Australia is moving forward with a stricter tax regime for foreign residents, including digital nomads and expats who hold local assets. While the government recently deferred the start date for some of these changes, the new rules are designed to broaden what counts as taxable property. This ensures that foreign residents pay capital gains tax (CGT) on a wider range of assets with economic ties to Australian land.
The updated rules apply to assets like leases, licenses, water entitlements, and infrastructure such as solar panels or mining machinery. There are two major technical shifts to watch. First, the "principal asset test" now looks at a 365-day window rather than a single point in time. Second, for high-value sales over $20 million, sellers must notify the Australian Taxation Office (ATO) before the transaction occurs.
Who it affects
These changes primarily impact foreign tax residents. This includes Australian expats living abroad and digital nomads who are no longer considered residents for tax purposes. If you are selling Australian property, shares in companies backed by land value, or specialized equipment, you likely fall under this net.
Casual tourists and short-term visitors are rarely affected as they seldom hold the types of CGT-taxable assets targeted by this legislation. However, for those with significant investments, the tax burden has increased. Foreign residents who acquired assets after May 2012 are already ineligible for the standard 50% CGT discount.
What to do
If you are planning to dispose of Australian assets, timing and compliance are everything. Keep these requirements in mind:
- Withholding Rates: For relevant sales, purchasers are now required to withhold 15% of the price and pay it to the ATO unless you provide a valid declaration.
- ATO Notification: If you are selling shares or interests worth more than $20 million, you must submit an approved form to the ATO before the deal closes.
- Valuations: You may need professional valuations to satisfy the new 365-day testing period for asset values.
Check out the latest nomad news to stay ahead of global tax shifts. Read our full Australia guide for the complete picture.