Australia — Non-Resident CGT & Taxable Australian Property

|---| | Country | Australia | | Applies to | Non-residents of Australia disposing of Australian assets | | CGT rate (non-resident) | 30% flat rate on net gain (no 50% discount available) | | Key test | Taxable Australian Property (TAP) test | | Withholding | 12.5% of gross proceeds on TAP transactions > AUD $750,000 | | Primary legislation | ITAA 1997 Div 855; TAA 1953 Sch 1 Subdiv 14-D | | Tax authority | ATO (ato.gov.au) | | Verified by | Pending — Australian CPA/CA sign-off required |

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Section 2 — The Core Rule

Non-residents are only subject to Australian CGT on Taxable Australian Property (TAP). Non-TAP assets sold by non-residents: no Australian CGT.

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Section 3 — The TAP Test: What Qualifies as TAP

Asset type	TAP?
Australian real property (land, buildings)	Always TAP
Mining, quarrying, prospecting rights in Australia	Always TAP
Shares in a company where >50% of market value derives from Australian real property interests	TAP (indirect interest)
Units in a trust where >50% of MV derives from Australian real property interests	TAP (indirect interest)
Options/rights to acquire any of the above	TAP
Assets used in Australian permanent establishment of a non-resident	TAP
Shares in an Australian company where assets are predominantly operating business, IP, goodwill, cash	NOT TAP
Portfolio shares (<10% interest in a listed company)	Generally NOT TAP regardless of asset composition

The critical question for company shares: Look through to the company's balance sheet. If >50% of the market value of the company's assets consists of Australian real property interests → TAP. If the company is an operating business with IP, goodwill, equipment, receivables → likely NOT TAP.

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Section 4 — CGT Rate for Non-Residents

Item	Non-resident treatment
CGT rate	30% (top individual rate, not graduated)
50% general discount	NOT available to non-residents (removed 8 May 2012)
SBCGT concessions	Available if all basic conditions met (including active asset test)
Main residence exemption	Generally not available to non-residents (unless Australian citizen/PR in specific circumstances)
Cost base calculation	Same as residents

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Section 5 — Foreign Resident Capital Gains Withholding (FRCGW)

When a non-resident sells TAP with gross proceeds ≥ AUD $750,000, the buyer is required to withhold 12.5% of the gross proceeds and remit to the ATO.

This is a payment on account (not a final tax). Actual tax liability is computed in the non-resident's Australian tax return.

FRCGW threshold	AUD $750,000
Withholding rate	12.5% of gross proceeds
Who withholds	The buyer (purchaser)
Remittance deadline	Day of settlement

Example: Non-resident sells shares (TAP) for AUD $10M. Buyer withholds AUD $1.25M (12.5%). Net gain is, say, AUD $8M. Australian tax at 30% = AUD $2.4M. The $1.25M already withheld is applied — balance payable AUD $1.15M via Australian tax return.

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Section 6 — Clearance Certificate

If the seller is an Australian resident (not a foreign resident), the seller can apply for a clearance certificate from the ATO to confirm residency, relieving the buyer of the withholding obligation.

If the seller IS a non-resident but believes no tax is payable (e.g. asset is not TAP, or gain is nil due to losses), the seller can apply for a variation to reduce the withholding amount.

Applications: via ATO online portal (myGov / Tax Agent portal). Processing time: 14-28 days typically.

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Section 7 — Filing Obligations for Non-Residents

A non-resident who sells TAP must lodge an Australian non-resident individual tax return for the year of disposal (even if no tax is payable after losses/concessions). Due date: 31 October following the end of the financial year (or later with a tax agent).

Australian Tax File Number (TFN) is required. Non-residents can apply via ATO.

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Section 8 — Interaction with Tax Treaties

Australia has double tax agreements (DTAs) with 45+ countries. Article 13 of most DTAs follows the OECD Model — gains on shares may be taxed by the country of residence of the seller UNLESS the shares derive principally from Australian real property (aligns with the TAP domestic test).

Under most treaties, the outcome mirrors the domestic TAP rules: if TAP → Australia taxes; if not TAP → Australia does not tax (residence country taxes).

Always check the saving clause and specific treaty wording.

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Section 9 — Sources

• ITAA 1997 Division 855 (non-resident CGT)
• Tax Administration Act 1953, Schedule 1, Subdivision 14-D (FRCGW)
• ATO: ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax
• ATO: Foreign resident capital gains withholding (ato.gov.au/FRCGW)

Working paper only. The TAP classification requires analysis of the company's asset composition by market value — not book value. Engage a qualified Australian tax adviser for transaction-specific advice.