Australian CGT for foreign residents

Australian CGT for foreign residents

Foreign residents generally disregard capital gains and losses on assets that are not taxable Australian property. For assets within Australia's CGT rules, the tax depends on the taxpayer, the transaction and any treaty. Individuals do not pay a universal 30% flat CGT rate. This guide covers ordinary investment disposals, with sources checked on 8 September 2026.

Classify the asset

• Five categories of taxable Australian property (TAP) — Section 855-15 has five categories of taxable Australian property (TAP): 1. Taxable Australian real property, including relevant Australian land and mining, quarrying or prospecting rights. 2. Indirect Australian real property interests. 3. Certain assets used in carrying on business through an Australian permanent establishment. 4. Options or rights to acquire assets in the preceding categories. 5. Assets retained within the CGT rules through an individual's choice on ceasing Australian residency. ([ITAA 1997, section 855-15](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/855-15))
• Share is not automatically TAP — An Australian company name, listing or place of incorporation does not by itself make a share TAP. Check each relevant category and any departure choice. ([ITAA 1997, section 855-15](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/855-15))
• Indirect Australian real property interest — non-portfolio interest test — An indirect Australian real property interest must meet both the non-portfolio interest test and the principal asset test. The non-portfolio test considers the holder and associates and generally requires at least 10%. It can also be met through the statutory 12-month holding period within the preceding 24 months. ([ITAA 1997, section 855-25, section 960-195](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/855-25))
• Principal asset test — The principal asset test is satisfied where the market value of taxable Australian real property exceeds that of other assets, applying the statutory look-through and integrity rules. Use market values rather than book values or the entity's business description. ([ITAA 1997, section 855-30](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/855-30))

Record the asset, ownership and associate interests, valuations, holding history, residency history and any treaty analysis. Profits on revenue account, permanent establishment income and trust distributions may require rules beyond this direct-disposal guide.

Work out the gain and tax

• Calculating the gain or loss — Calculate each gain using capital proceeds and adjusted cost base. Calculate a loss using reduced cost base. Apply eligible capital losses and concessions in the statutory order. An asset that is not TAP can produce a disregarded loss as well as a disregarded gain.

Foreign-resident ordinary income tax rates 2025–26 ([ATO: foreign resident tax rates](https://www.ato.gov.au/tax-rates-and-codes/tax-rates-foreign-residents))

Taxable income	Income tax before applicable offsets
$0–$135,000	30%
$135,001–$190,000	$40,500 plus 37% of the excess over $135,000
Above $190,000	$60,850 plus 45% of the excess over $190,000

• Net capital gain and Medicare levy — The net capital gain enters taxable income. These rates are expressly for 2025–26; use the rates and status applicable to another year. Full-year foreign residents do not pay the Medicare levy. Companies and trusts require their own tax calculation. ([ATO: foreign resident tax rates](https://www.ato.gov.au/tax-rates-and-codes/tax-rates-foreign-residents))
• Partial CGT discount for foreign residents — For CGT events before 1 July 2027, foreign and temporary residents can sometimes obtain a partial CGT discount. Acquisition on or before 8 May 2012 and periods of Australian residency affect the calculation. A person who acquired an asset after 8 May 2012 and was foreign or temporary resident throughout ownership cannot claim the discount. Do not deny a partial discount without checking the history. ([ATO: CGT discount for foreign residents](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/cgt-discount-for-foreign-residents))
• 2026 tax reform Act changes from 1 July 2027 — The 2026 tax reform Act changes CGT arrangements for events and assessments from 1 July 2027. This guide does not calculate those later transactions. ([Treasury Laws Amendment (Tax Reform No. 1) Act 2026](https://www.legislation.gov.au/C2026A00049/asmade/text))

Check a former home's exemption

• Main residence exemption for foreign residents — Being an Australian citizen or permanent visa holder does not preserve the main residence exemption while foreign resident. The life events exception requires a continuous foreign-resident period of six years or less and a specified event: relevant terminal illness, death of a spouse or child, or a qualifying relationship breakdown. Check the precise conditions, including the child's age. The ordinary six-year absence rule alone does not override the foreign-resident restriction. ([ITAA 1997, section 118-110](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/118-110))

Address withholding before settlement

• Foreign resident capital gains withholding — contracts from 1 January 2025 — 15% and the previous $750,000 property threshold is removed % (For property contracts signed from 1 January 2025) ([ATO: FRCGW overview](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-resident-capital-gains-withholding-overview))
• Foreign resident capital gains withholding — contracts 1 July 2017 to 31 December 2024 — 12.5% rate and $750,000 threshold apply % (For relevant contracts signed from 1 July 2017 to 31 December 2024) ([ATO: FRCGW overview](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-resident-capital-gains-withholding-overview))
• Clearance certificates, variations and declarations — Australian-resident vendors need a valid ATO clearance certificate for transactions covered by that process. Foreign residents may apply for a variation. Other relevant interests and options use vendor declaration rules; excluded transactions include qualifying stock-exchange transactions. Withholding does not apply identically to every TAP asset. Obtain the right document before settlement and arrange payment of required withholding to the ATO at or before settlement. ([ATO: FRCGW overview](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-resident-capital-gains-withholding-overview))
• Withholding is a credit, not final tax — Withholding is a credit towards the vendor's tax, not a calculation of the final gain or tax. Reconcile it with the Australian return and retain the purchaser's payment evidence. Confirm lodgement obligations and the applicable deadline for the taxpayer's entity and circumstances.

Contributed by Ryan Duguid.