A Complete Guide to Capital Gains Tax in Australia for Aussie Expats Living Overseas
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We’ve all heard of capital gains tax (CGT) – but do you know exactly what it is, when to pay it, or how it affects expats and foreign residents? If you’re buying or selling assets in Australia, you will inevitably come across capital gains tax.
Australian property owners, investors, and expats often need clarity on how capital gains tax applies when selling assets, particularly when residency status or overseas income is involved.
This article explains how capital gains tax works in Australia and highlights key considerations that can affect tax outcomes for individuals managing assets across borders.
What Is Australian Capital Gains Tax (CGT)?
A capital gain is the profit margin when you sell property in Australia. Put simply, it’s the difference between what you paid for the acquisition and what you sold it for, minus the costs incurred by selling. If you do not make a gain, you make a capital loss.
Capital Gains Tax is the amount you pay on the gains during the tax year you sold the asset. It applies to shares, licences, and other high-value assets. However, CGT on property is the most often discussed one. There are a few exceptions to capital gains tax, which we’ll get into later.
Australian Capital Gains Tax (CGT) for Expats
- Applies to Taxable Australian Property: Expats are only liable for CGT on Australian assets, primarily real estate and business assets in Australia.
- Reduced CGT Benefits: Unlike residents, expats generally don’t get the 50% CGT discount for assets acquired after May 2012. This means they pay tax on the full capital gain.
- Main Residence Exemption Limited: The main residence exemption, which exempts your principal residence from CGT, applies to expats only if they meet a specific “life events test.”
What Assets Are Subject to Australian CGT?
In Australia, Capital Gains Tax (CGT) applies to the profit made from the sale or disposal of certain assets acquired after 20 September 1985. When you sell or dispose of an asset for more than its cost base (purchase price and other associated costs), the difference is considered a capital gain and may be subject to CGT.
Here are the key assets that are subject to Australian CGT:
- Real estate (investment properties, land, vacation homes).
- Shares and investments (stocks, ETFs, managed funds, cryptocurrencies).
- Business assets (premises, goodwill, equipment).
- Collectibles (art, antiques, rare items).
- Intellectual property (patents, trademarks, copyrights).
- Foreign assets (for Australian tax residents).
It’s important to track the cost base of your assets, including the purchase price and associated expenses (legal fees, stamp duty, etc.), as these will be deducted from the sale price to calculate your capital gain. When an asset is sold, the capital gain is added to your assessable income and taxed at your marginal rate. However, if you hold the asset for more than 12 months, you may be eligible for a 50% CGT discount.
For complex assets or international investments, it’s often a good idea to seek professional advice to ensure you understand your tax obligations.
What Is the Rate of Australian CGT?
In Australia, Capital Gains Tax (CGT) is not a separate tax but part of your income tax. The capital gain you make from selling or disposing of an asset is added to your taxable income and taxed at your marginal income tax rate. However, the rate of CGT can vary depending on factors such as how long you’ve held the asset, your residency status, and whether any concessions or exemptions apply.
1. CGT for Individuals (Australian Residents)
The capital gain is added to your total income for the year and taxed at your marginal tax rate. Australia’s marginal tax rates for individuals (2025-2026) are:
- 0% for income up to AUD $18,200 (tax-free threshold).
- 16% for income from $18,201 to $45,000.
- 30% for income from $45,001 to $135,000.
- 37% for income from $135,001 to $190,000.
- 45% for income above $190,000.
2. 50% CGT Discount (for Individuals)
If you hold the asset for more than 12 months, you may be eligible for the 50% CGT discount. This means that only 50% of the capital gain is added to your taxable income.
Example: If you make a $50,000 capital gain from selling an asset after holding it for more than 12 months, only $25,000 will be included in your taxable income.
3. CGT for Foreign Residents
Foreign residents are generally subject to CGT only on taxable Australian property, such as real estate or business assets located in Australia.
Foreign residents are not eligible for the 50% CGT discount unless the asset was acquired before 8 May 2012.
Foreign residents pay CGT based on their taxable capital gains at non-resident tax rates, which start at 30% from the first dollar of income.
4. CGT for Companies
Companies pay tax on capital gains at the corporate tax rate, which is a flat 30% for large businesses or 25% for smaller businesses that meet the eligibility criteria.
Companies do not receive the 50% CGT discount.
5. CGT for Self-Managed Super Funds (SMSFs)
SMSFs pay a 15% tax rate on capital gains for assets held within the fund.
SMSFs can receive a 33.33% CGT discount if the asset is held for more than 12 months, meaning the effective tax rate on the capital gain would be 10%.
6. CGT for Trusts
Trusts (such as family trusts) are not taxed directly on capital gains. Instead, the gain is distributed to beneficiaries, who pay CGT at their own marginal tax rates.
Beneficiaries may be eligible for the 50% CGT discount if the asset has been held for more than 12 months.
By holding assets for more than 12 months, Australian residents can significantly reduce their CGT liability through the 50% discount, making long-term investments more tax-efficient.
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CGT Calculation: How Is Capital Gains Tax Calculated in Australia?
Net capital gains are treated as part of your taxable income – it’s not a separate tax.
We’ll discuss foreign residents’ CGT calculation later, but here’s how capital gains tax (CGT) is calculated in Australia for citizens and PR holders.
1. Work Out Your Capital Gain
Selling Price – Cost Price (including purchase costs and any capital improvements) = Capital Gain/Loss
2. Apply CGT Discounts (if eligible)
Individuals who owned the asset for more than 12 months get a 50% discount on their capital gain. This effectively reduces the taxable gain.
3. Include Capital Gain in Taxable Income
Add the discounted capital gain (or full gain if held less than 12 months) to your annual income.
4. Pay Tax at Marginal Rate
Your total tax liability is calculated based on your combined income (including the capital gain) and your marginal tax rate.
CGT Calculation Example
Ron, an Australian resident for tax purposes, sells an investment property he owned for 20 years (making him eligible for the 50% CGT discount).
- Selling Price: AU $1,000,000
- Cost Price (including purchase & improvements): AU $900,000
- Capital Gain: $1,000,000 – $900,000 = $100,000
- Discounted Capital Gain: $100,000 (gain) * 50% (discount) = $50,000
Ron’s annual income is AU $90,000. Adding the discounted capital gain:
- Taxable Income = $90,000 (income) + $50,000 (discounted gain) = $140,000
Ron will pay capital gains tax on the $50,000 at his marginal tax rate. You can find tax brackets on the Australian Taxation Office (ATO) website to determine the exact tax amount.
CGT Exemptions
Main Residence Exemption
This is the most common exemption. Your principal place of residence (main home) is generally exempt from CGT, regardless of how long you owned it or the profit made.
You’re also eligible for the main residence exemption if you’re a permanent resident. You cannot use the exemption on an investment property.
The 6-Year Rule
If you’ve moved out of your home but haven’t sold it, the 6-year rule could help you avoid CGT—even if you rent the property out.
To use the 6-year rule, your property must:
- Have first been your main residence (you must have lived in it before renting it out)
- Stop being your actual home (you’ve moved out)
- Be used to generate income (like through renting)
If you leave your former home vacant or use it as a holiday home—and you’re not treating any other property as your main residence—you can actually treat it as your main residence indefinitely.
Assets Owned Before September 1985
Assets acquired before September 20, 1985, are generally exempt from CGT.
50% Discount on CGT
You may get a 50% capital gains tax discount for your asset if you have owned it for more than 12 months and are an Australian tax resident.
Cars and Motorcycles
The sale of your personal car or motorcycle is exempt from CGT.
Specific Awards and Payouts
Decorations for bravery, compensation for damages, and certain types of payouts might be exempt.
Other Potential Exemptions
- Assets used to produce exempt income (like government bonds).
- Transfer of superannuation interest within small super funds due to relationship breakdown.
- Granny flat arrangements (under specific conditions).
Capital Gains Tax Deductions Australia
In Australia, when calculating Capital Gains Tax (CGT), you can reduce the amount of your taxable capital gain by applying CGT deductions. These deductions, often referred to as adjustments to the cost base, can lower the amount of profit subject to tax when you sell or dispose of an asset.
Here’s a guide to the main CGT deductions available:
- Cost base adjustments (purchase price, stamp duty, legal fees, improvement costs, etc.).
- 50% CGT discount for individuals holding assets for more than 12 months.
- Small business CGT concessions (15-year exemption, 50% reduction, retirement exemption, rollover relief).
- Capital losses to offset gains in the same year or carry forward to future years.
- Holding costs for non-income-producing assets (interest, rates, land taxes).
- Main residence exemption and other specific exemptions.
Properly calculating the cost base and understanding eligible deductions can significantly reduce your CGT liability when you sell an asset.
It’s important to keep detailed records of all costs related to the purchase, improvement, and sale of assets to ensure you can claim all relevant deductions. For more complex situations, consulting with a tax professional is advisable.
It’s important to note that, unlike residents, Australian expats generally don’t qualify for the 50% CGT discount for assets acquired after May 2012. They may also have limitations on the main residence exemption unless they meet a “life events test.”
How to Minimise Capital Gains Tax
Even with the 50% discount method, paying capital gains tax is a hefty expense. The best way to reduce or avoid capital gains tax is to keep accurate records of your cost base. Any capital costs, such as stamp duty, are offset against your capital gain. Accordingly, you reduce the net capital gain taxable.
Here are some strategies you can consider to minimise capital gains tax (CGT) in Australia.
Owning Assets for More Than 12 Months
- This qualifies you for the 50% CGT discount, which significantly reduces your taxable capital gain.
Maximising the Main Residence Exemption
- This exemption applies to your principal place of residence. Even if you rent it out for a while, you might still qualify under the six-year rule.
Increasing Your Cost Base
- Include all purchase-related costs (stamp duty, legal fees) and capital improvements made to the property in your cost base. This increases the amount deducted from the selling price, reducing your capital gain.
Offsetting Capital Gains with Capital Losses
- If you sell other assets at a loss, you can use those capital losses to offset your capital gains, potentially reducing your overall CGT liability.
Strategic Selling
- Consider timing the sale of your asset to minimise your total taxable income for the year. This might involve delaying the sale or strategically grouping it with other income sources.
Utilising Concessions for Specific Assets
Affordable housing specifically designed for low-income earners may qualify for a 60% CGT discount.
Structuring Your Investments
- Consider holding investment properties in a Self-Managed Super Fund (SMSF). While offering less CGT discount (33.3%), the investment taxation rate within the SMSF might be lower than your marginal tax rate.
- Explore using a family trust to distribute capital gains across multiple beneficiaries, potentially lowering the overall tax burden.
These are general strategies, and their effectiveness depends on your individual circumstances. Tax laws can be complex. Consulting a qualified tax professional is crucial for personalised advice and ensuring you comply with all regulations.
Foreign Residents and Capital Gains Tax
The situation is slightly different if you’re not an Australian tax resident. If you reside overseas with no intention to return to Oz to live or work, you might be a non-resident for tax purposes. While this has its benefits – you don’t have to pay Australian tax on foreign income – it’s a disadvantage for capital gains tax.
Firstly, a foreign resident (including expatriates) cannot claim CGT discounts or exemptions. Secondly, they must pay the foreign resident capital gains withholding tax (FRCGW).
Foreign Resident Capital Gains Withholding (FRCGW)
- Applies to Expats Selling Property: The buyer must withhold 15% of the sale price and send it to the Australian Taxation Office (ATO). This is an upfront payment towards any potential CGT liability.
- Can be Claimed Back: Expats can claim this withheld amount back when they lodge their Australian tax return, depending on their final CGT liability.
CGT Case Studies
Let’s take a closer look at how much tax expats have to pay in Australia in these three case studies.
Scenario One: Australian Tax Resident in Singapore
Caitlin was born in Australia and decided to move to Singapore in her mid-thirties. She had bought a property in Sydney ten years before moving abroad. In 2010, she paid AU $594,000 for a four-bed house. Caitlin lives and works in Sydney until deciding to pack up and move to Singapore in 2020.
She rents out her Sydney home when she leaves Australia while looking for somewhere to live in Singapore. She applied for non-residency, but the ATO has not yet approved it. Therefore, she pays tax on her Australian rental property and Singapore income.
In Singapore, Caitlin works as an English teacher and earns SG $36,000 annually. With today’s exchange rates, this is about AU $37,080 a year.
Caitlin rents out her Sydney property for AU $450 a week, equating to AU $23,400 in a whole year. She has an Australian side hustle that earns her about AU $8,000 a year. In a typical year, Caitlin’s current taxable income is AU $68,480. She pays an income tax rate of 32.5% – about AU $12,723.
However, after two years in Singapore, she sold her Sydney investment property to cease residency in Australia entirely. After all, property prices have risen significantly in the last two years. She sells the property for an incredible AU $1,600,000.
Now, she needs to work out her cost base before calculating her capital gain and lodges her Australian tax return. Net capital losses include:
- Transfer costs
- Stamp duty
- Borrowing expenses, such as loan application or mortgage discharge fee
- The amount paid for the asset
- Advertising costs to find a buyer or tenant
- Valuation fees
- Professionals, such as conveyancers, mortgage brokers, real estate agents and accountants
Caitlin’s expenses add up to AU $41,000. As she is an Australian citizen, she does not need to pay the foreign resident stamp duty surcharge. When the time comes to lodge a tax return, she deducts her capital losses from her other capital gains.
So, her usual Singapore income is AU $37,080. Plus, she earns AU $8,000 for her Australian side hustle. She earns 26 weeks’ worth of rental income on her property before preparing it to sell, equalling AU $11,700. Caitlin makes a capital gain selling her property AU $1,600,000. Her net capital gains equal AU $1,656,780.
Now, she needs to deduct the AU $41,000 expenses, plus the AU $594,000 she originally paid for the property. Her new net capital gains are AU $1,021,780.
Considering Caitlin isn’t eligible for the main residence exemption, she’s looking at a hefty sum to pay. Fortunately, she is still an Australian tax resident. While this means she pays extra income tax on her Singapore wages, she can save 50% when paying capital gains tax.
Only Caitlin’s property sale proceeds are eligible for the 50% reduction. So, we divide the AU $1,006,000 profit in two, equalling AU $503,000. Finally, Caitlin lodges her income tax return with a total capital gain of AU $559,780. She pays AU $222,568 in capital gains tax.
Scenario Two: Expat in Hong Kong
Oliver, like Caitlin, is Australian born and bred. However, he decides to move to Hong Kong to live and work permanently. Oliver gives up all work in Australia and ceases his Australian residency. He still owns his property in Melbourne, which he’s held for five years.
When Oliver first bought his property in Melbourne, he paid a purchase price of AU $770,221. Since then, its market value has risen to AU $1.038 million. During that time, he earned AU $440 in rent a week.
He works as an accountant in Hong Kong, earning HK $291,188 annually. However, as he is not a tax resident, he only pays tax on his Australian taxable property. His earnings in Hong Kong are safe from ATO – he won’t have to pay tax on it in Australia.
After living in Hong Kong for two years, Oliver wants to expand his investment properties portfolio. He applies for an Australian home loan to buy a unit worth AU $467,500. His new investment earns him AU $320 a week. Therefore, he has a total of AU $39,520 in taxable income. With a non-resident tax rate, he pays AU $12,844 in tax in a financial year.
While living in Hong Kong, Oliver runs into some difficulty. To help his financial situation, he decides to sell his unit. He’s only owned it for 18 months. However, he makes a capital loss. He’s struggled to invite tenants into his property, and house values are dropping now. Oliver was negatively gearing the property, but now he needs the cash.
The selling price is AU $450,000. When he sells, the purchaser withholds 15% as FRCGW tax. He claims it back in credit in his tax return. In this financial year, he has the following income:
- AU $22,880 rental income for his house
- AU $3,840 rental income for his unit for 12 weeks before selling
- AU $450,000 selling price
He has the following capital losses:
- AU $10,000 rental property costs, including maintenance, management, and advertising
- AU $467,500 initial cost of the unit
So, he adds his capital proceeds together to equal AU $476,720. Next, Oliver subtracts his expenses to determine if he’s made a capital gain or loss. Unfortunately for him, he’s made a loss of AU $780. However, as he’s not an Australian resident, he’s saved himself from paying capital gains tax.
Oliver still has to submit his return with his capital loss. Generally speaking, individual losses can be carried forward indefinitely. However, he must still claim it at the first opportunity. In the following year, Oliver earns another AU $22,880 rental income for his house. He spends a further AU $7,000 in expenses.
Therefore, his capital gain is AU $15,880. He offsets his previous capital loss of AU $780. Consequently, he only has to pay capital gains tax on $15,100. His total capital gains tax bill comes to $4,907.50.
Scenario Three: Expat Returning to Australia
Bernie has lived in the US for the last seven years. When he left Canberra, he kept his property there and rented it out. He bought it for AU $616,300. Bernie now earns AU $633 per week from his rental property. Each year, he pays around AU $5,000 in property management and maintenance fees.
He is now no longer an Australian tax resident. His US $80,000 in America is not taxable income in Australia.
In an average year, Bernie pays capital gains tax on AU $27,916. As Bernie now counts as a foreign resident, he must pay AU $9,072.70 to ATO each year.
Yet, Bernie is now looking to return to Australia. Specifically, he wants to move to New South Wales. He cannot afford to buy a new house in Sydney and keep his current property in Canberra. It can only produce income of AU $13,843.3 a year after expenses and tax.
So, with the recent housing prices shooting up, he sells the property for AU $1,015,900. He spends around AU $20,000 on real estate agents, advertising costs, and conveyancing fees.
Bernie’s capital gains for the year:
- AU $18,990 rental property income (Bernie stops renting it out 30 weeks into the year)
- AU $1,015,900 Canberra house sale
Total: AU $1,034,890
Capital losses:
- AU $3,000 rental property management fees (he doesn’t pay the full sum as he stops renting it before the year is up)
- AU $20,000 selling expenses
- AU $616,300 initial purchase price of his Canberra house
Total: AU $639,300
So, to calculate capital gains tax, Bernie adds up his capital gains and subtracts his expenses. His total capital gain is AU $395,590.
Meanwhile, after selling his Canberra property, he moves into a new home in Sydney. When he lodges his capital gains, he must tick that he is an Australian tax resident. Even though he lived in the US for 30 weeks, he returned and became a tax resident part way through the year.
In Sydney, he earns $65,000 annually. He must put down the 22 weeks of his salary for this year’s tax return. So, he adds $27,500 to his capital gains. In total, he pays $161,507.42 income and capital gains tax.
Bernie’s a new house in Sydney worth $1,800,000. He uses his profits as a deposit. He needs to pay AU $83,567 stamp duty. Fortunately, Bernie doesn’t put his foreign spouse as a joint borrower. Otherwise, he would have to pay the foreign resident surcharge.
However, as this is not a capital gain or loss, it does not go on his tax return this year. But he keeps precise and accurate records. When he sells the property in the future, he can use these expenses to offset his capital gains.
Key Takeaways
- Capital gains tax is not a separate tax to your income tax rate. It’s added together in the year you sold the CGT asset.
- Australian tax residents get the main residence exemption or 50% off paying CGT.
- Keep accurate records of your capital gains to minimise the amount you pay.
- You can find a capital gains tax calculator online.
FAQs about Capital Gains Tax on Property Australia
Can I buy a house in Australia if I am not a permanent resident?
No, you cannot buy a house in Australia if you are not a permanent resident. You will need to obtain permission from the FIRB to buy any property in Australia, including a house.
If I buy a house in Australia, will I be eligible for permanent residency?
No, buying a house in Australia does not automatically qualify you for permanent residency. There are a number of other factors that the Australian government considers when assessing permanent residency applications, such as your skills, qualifications, work experience, and financial assets.
How much tax do you pay on capital gains in Australia?
In Australia, capital gains tax (CGT) is applied at your marginal income tax rate. If you hold the asset for more than 12 months, you may be eligible for a 50% CGT discount. For individuals, capital gains are added to your taxable income and taxed accordingly. Non-residents pay higher rates and are not eligible for the CGT discount.
How does Australia capital gains tax change for foreign residents?
Foreign residents in Australia face different capital gains tax (CGT) rules. Unlike Australian residents, foreign residents are not eligible for the 50% CGT discount on assets held for more than 12 months. Additionally, foreign residents are subject to CGT only on Australian property or taxable Australian assets, such as real estate. Higher tax rates may also apply, depending on the foreign resident’s income.
Do non-residents pay capital gains tax on Australian shares?
No, non-residents typically do not pay capital gains tax (CGT) on Australian shares unless the shares are in land-rich companies (where the majority of assets are Australian real estate). For most Australian shares, non-residents are exempt from CGT.
Do expats pay capital gains?
Yes, expats may pay capital gains tax (CGT) in Australia on Australian-sourced assets, such as property. However, expats typically do not pay CGT on foreign assets. Expats who are non-residents for tax purposes are ineligible for the 50% CGT discount on assets held for more than 12 months.
What is capital gains tax on property?
Capital Gains Tax (CGT) on property in Australia refers to the tax you pay on the profit (capital gain) you make when selling or disposing of property that has increased in value. The capital gain is the difference between the property’s sale price and its cost base (which includes the purchase price and other expenses related to buying and owning the property).
- Investment properties, vacation homes, and vacant land are subject to CGT.
- Main residences are generally exempt, but partial exemptions apply if the home is used to produce income.
- CGT is calculated on the capital gain (sale price minus cost base), and 50% discount is available if the property is held for more than 12 months.
- The capital gain is added to your taxable income and taxed at your marginal rate.
Understanding CGT and keeping detailed records of all property-related expenses can help you accurately calculate your tax liability when you sell. It’s advisable to consult a tax professional for complex cases or high-value transactions.
When is capital gains tax due?
Capital Gains Tax (CGT) is due when you sell or dispose of an asset, such as property or shares, and make a profit. It is reported in your tax return for the financial year in which the sale occurs, and any CGT liability is paid as part of your annual income tax.
Do non residents pay capital gains tax on shares?
No, non-residents of Australia are generally exempt from paying Capital Gains Tax (CGT) on shares in Australian companies, unless the shares are considered indirect interests in Australian real property (e.g., shares in a company that primarily holds Australian real estate).
For regular Australian company shares, non-residents are typically not subject to CGT. However, they may still be liable for tax in their country of residence.
How much is capital gains tax in Australia for non resident?
For non-residents, Capital Gains Tax (CGT) in Australia applies primarily to taxable Australian property, such as real estate or business assets. Non-residents do not get the 50% CGT discount that Australian residents can claim on assets held for more than 12 months (if the asset was acquired after 8 May 2012).
Key Points for Non-Resident CGT:
- Taxable Assets: CGT applies to Australian real estate or business assets, but not typically to shares or managed funds unless they relate to real property.
- Tax Rate: The capital gain is added to your Australian-sourced income and taxed at non-resident tax rates:
- 30% for income up to $135,000.
- 37% for income from $135,001 to $190,000.
- 45% for income over $190,000.
Non-residents do not benefit from the tax-free threshold that Australian residents receive.
When do you pay capital gains tax on property in Australia?
You pay Capital Gains Tax (CGT) on property in Australia when you sell or dispose of the property and make a profit. The CGT is due in the financial year the sale occurs and is paid as part of your annual income tax return.
You report the capital gain in your tax return for that financial year, and the tax is payable by the standard income tax lodgment deadline (usually by October 31 for individuals).
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