CGT on foreign-owned property in Australia
The government is tightening capital gains tax regulations for foreign residents. This sends a clear message to foreign citizens that if they want to buy property in Australia, they must follow our capital gains tax laws.
The government will make it illegal for foreign residents to sell property in Australia and claim the capital gains tax exemption for their primary residence.
The government strengthened the foreign resident capital gains tax withholding regime on July 1, 2017, by increasing the withholding rate (from 10% to 12.5%) and expanding the pool of foreign Residents who are subject to the regime can avoid it by lowering the value of their properties (from $2 million or more to $750,000 or more). These changes will reduce the likelihood of foreign residents leaving the country.
When will foreign residents no longer be eligible for the primary residence exemption?
If the seller of the primary residence is a foreign resident for tax purposes at the time of sale, the main residence exemption will no longer be available for properties purchased after 7.30pm (AEST) on May 9, 2017.
Foreign residents can claim the main residence exemption for properties purchased before 7.30 p.m. on June 30, 2019. on May 9, 2017 (AEST).
Will the exemption for primary residence still be available to Australian citizens?
Yes, a person who is an Australian tax resident at the time of when they are selling their primary residence. Even if they acquire foreign residency while owning their primary residence, Australian residents will not be affected if they re-establish Australian tax residency and are an Australian tax resident when they are selling their primary residence
Will transient residents, including those from other countries, be affected?
Temporary residents in Australia will not be affected. This includes New Zealanders who are on special category visas in Australia and are thus considered temporary residents.
What is the capital gains tax withholding regime for foreign residents?
If a buyer purchases an asset from a foreign resident, they must withhold 12.5% (up from 10%) of the purchase price and pay it to the Tax Commissioner if the asset has a market value of at least $750,000 (down from $2 million). Due to the fact that it is a non-final withholding tax, the foreign resident seller will receive a final refund.