Australian residents are subject to CGT on all of their CGT assets worldwide unless an exception applies to the asset. Foreign and temporary residents are subject to CGT only on five prescribed categories of CGT assets, which all have some connection to Australia — known as ‘taxable Australian property’ (TAP).
- Tax Residency and CGT:When it comes to capital gains tax, your tax residency status matters. Generally, foreign and temporary residents are subject to CGT only on specific assets—those that fall under the category of taxable Australian property. These assets typically include real estate within Australia and assets used for business activities in the country. However, the 50% CGT discount is generally not available to foreign and temporary residents for assets acquired after 8 May 20121.
- Taxable Australian Property (TAP):So, what exactly qualifies as taxable Australian property? Well, it’s like a VIP list for assets that have some connection to the Land Down Under. Here are the five categories of TAP:
- Real Estate: Think houses, apartments, and land.
- Mining, Quarrying, or Prospecting Rights: If you’ve struck gold (or any other valuable mineral) in Australia, this applies.
- Indirect Australian Real Property Interests: Fancy term, right? It includes shares in companies whose main assets are Australian real estate.
- Options or Rights to Acquire TAP: If you’re holding options or rights to buy TAP, they’re on the list.
- Superannuation Interests: Yep, even your superannuation fund can be part of the TAP club.
- Main Residence Exemption for Foreign Residents:Now, let’s talk about homes. As a foreign resident, you might wonder if your humble abode is exempt from CGT. Well, there’s good news! You can potentially qualify for the main residence exemptionif you meet the life events test. This means that even if you’re not an Aussie citizen, your home sweet home might escape the CGT clutches2.
- Foreign Resident Capital Gains Withholding (FRCGW):Picture this: You’re selling an Australian property, and the buyer happens to be a foreign resident. In such cases, the buyer is required to withhold and remit 10% of the total consideration to the Commissioner of Taxation. Fear not—the foreign seller gets a credit for the amount paid. It’s like a tax tango between buyer and seller, with the Commissioner as the dance instructor3.
Remember, tax matters can get intricate, so it’s always a good idea to consult a tax professional or visit the Australian Taxation Office for the most up-to-date and personalized advice.
Reference: Australian Taxation Office – Foreign Residents and CGT123.
Disclaimer: Any advice on this site is general nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.
