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Superannuation and Investors

Superannuation And Investors

Expanding the CGT rule for foreign residents beginning on or after 1 July 2025

The foreign resident capital gains tax (CGT) regime will be increased by:

  • Clarifying and expanding the sorts of assets on which foreign residents are liable to CGT.
  • The point-in-time main asset test will be extended to a 365-day period. 
  • Foreign residents who sell shares or membership interests worth more than $20 million must inform the ATO before completing the transaction. 

Under existing legislation, foreign residents are liable to CGT when they sell an asset classed as ‘taxable Australian property’ (TAP). The provisions are intended to guarantee that non-residents are liable to Australian CGT when disposing of assets having a sufficient connection to Australian land or assets employed in Australian commercial operations.

Shares in a company and trust units can be classified as TAP if the taxpayer and certain related parties own at least 10% of the entity and more than 50% of the entity’s gross market value is attributable to real property in Australia and similar assets.

The legislation is designed to guarantee that Australia may tax foreign residents on direct and indirect sales of assets having a close economic tie to Australian land, bringing the treatment more in line with the tax treatment that Australian citizens now get.

The new ATO notification mechanism will strengthen monitoring and compliance with the foreign resident CGT withholding laws, particularly where a seller self-assesses that the transaction does not entail TAP.

The proposed revisions would also bring Australia’s tax rules for foreign resident capital gains in line with OECD norms and worldwide best practice.

The government will consult on the measure’s implementation specifics, which are expected to raise collections by $600 million and payouts by $8 million during the five-year period beginning in 2023-24.