If you are a non-resident for tax purposes in Australia and you hold shares in Australian companies, you may wonder if you have to pay Capital Gains Tax (CGT) when you sell them. It is a common point of confusion.
The good news is that not all shares are subject to CGT for non-residents. But it depends on the type of asset and a few key rules. Read on to learn all about CGT on shares for Australian non-residents.
Capital Gains Tax applies to the profit you make when you sell an asset. In Australia, this includes property, shares, and other investments. CGT is part of your income tax.
When you sell an asset for more than you paid, you have a capital gain. If you sell it for less, you have a capital loss. You use these gains or losses to work out how much tax you owe.
You will also face capital gains tax after:
- Transferring the share or item to someone else.
- Giving it as a gift.
- Swapping it out for something else.
- Getting any compensation for the item after its destruction.
Get Expert Tax Help—Wherever You Are
Do Australian Non-Residents Pay CGT on Shares?
As a non-resident, you do not pay CGT on shares because non-residents only pay CGT on “taxable Australian property.” This is a special term that includes:
- Direct interests in Australian real estate, like a house or land.
- Indirect interests in Australian real estate, like shares in a “land-rich” company.
- Assets used to run a business in Australia.
Most shares in regular Australian companies do not count as this. If the company is not “land-rich” or does not hold mainly Australian real property, you usually will not pay CGT on those shares when you sell them.
Unfortunately, although the number of share types on which expats need to pay capital gains tax is minimal, you don’t receive any CGT discount.
Australian residents can claim a 50% CGT discount on qualifying capital gain profits but expats can’t, making it a significant disadvantage.
What Is a Land-Rich Company?
A “land-rich” company is one whose main value comes from Australian real property.
For example, a company that holds large amounts of Australian real estate could be “land-rich.” If you hold shares in such a company, your shares may be treated like an indirect interest in Australian real estate. In that case, CGT may apply if you sell those shares.
No CGT Discounts for Non-Residents
If your shares are taxable Australian property, keep in mind that non-residents do not get the CGT discount that residents get.
Australian residents who hold shares for over one year often get a 50% discount on their capital gain. As a non-resident, this discount does not apply to you for gains that accrued after a certain cut-off date (commonly after 8 May 2012).
This means if you do have a taxable gain—say from selling shares in a land-rich company—you will likely pay tax on the full gain. There is no halving it.
CGT Rate for Non-Residents
If you must pay CGT as a non-resident, your gains are added to your Australian income for that financial year.
Non-residents do not get the same tax-free threshold as residents. Residents have a threshold below which they do not pay tax on their income. Non-residents start paying tax from the first dollar of Australian-sourced income.
That means if you have a capital gain, it will be taxed at the non-resident tax rates, which can be higher compared to what a resident might pay.
Australian Non-Resident Tax Rates 2024-25
| Income Thresholds | Tax Rate | Tax Payable |
|---|---|---|
0 – $135,000 | 30% | 30c for each $1 |
$135,001 – $190,000 | 37% | $40,500 plus 37c for each $1 over $135,000 |
$190,001 and over | 45% | $60,850 plus 45c for each $1 over $190,000 |
What If You Have Capital Losses?
If you sell shares at a loss, you may be able to use that loss to offset capital gains in the same financial year.
If you do not have any gains in that year, you can carry the loss forward and use it to offset future capital gains. This rule applies to both residents and non-residents.
Keep in mind that if the shares were not considered taxable Australian property, and you are a non-resident, you do not usually need to report those losses since those assets are not subject to Australian CGT in the first place.
Calculating Australian Expat Capital Gains Tax on Shares
Calculating Capital Gains Tax (CGT) on a share as an Australian expat involves a few steps. The only real difference in this process between expats and Australian residents is that after step three, Australian residents need to apply for their 50% CGT discount before reporting their net capital gain or capital loss.
Here’s a general outline.
1. Determine Your Tax Residency Status
Before you start, confirm whether you’re a tax resident or a non-resident. If you’re living overseas long-term, you’re likely a non-resident.
2. Identify the Type of Shares You Sold
Once you know your residency status, check if the shares are considered taxable Australian property. For most regular shares in Australian companies (those not primarily holding Australian real estate), non-residents generally won’t owe CGT in Australia.
If you’re a non-resident and the shares aren’t taxable Australian property, you usually don’t pay CGT to Australia on that sale.
3. Calculate Your Capital Gain or Loss
If you’ve established that your CGT event (the sale of shares) is taxable in Australia, the next step is simple math.
Determine Your Cost Base: Add up what you originally paid for the shares, plus any related costs such as brokerage fees, stamp duty (if any), and other acquisition expenses.
Work Out the Sale Price (Capital Proceeds): Identify how much you sold the shares for, minus any related selling costs like brokerage fees.
Calculate the Gain or Loss: Subtract your total cost base from your sale price. If the result is positive, you have a capital gain. If it’s negative, you have a capital loss.
4. Add Your Gain to Your Assessable Income
If you owe CGT, the capital gain is added to your assessable income for the tax year. Your tax is then calculated using the applicable tax rates for your residency status.
Non-residents have different tax thresholds, with no tax-free bracket, and often start paying tax from the first dollar of Australian-sourced income.
5. Use Capital Losses if You Have Them
If you have any other capital losses from the current or previous years, you can use those to reduce your capital gain. You can’t use capital losses to create a tax refund, but they can lower the amount of tax you pay by reducing your overall gain.
6. Lodge an Australian Tax Return If Required
If you have a taxable capital gain in Australia, you’ll likely need to lodge an Australian tax return, even if you’re living overseas. This allows you to report the gain and pay any tax due. If you’re unsure, get advice from a tax professional.
How Does Australia Tax Non-Resident Share Traders and Day-Traders Who Trade Australian Shares?
Non-residents who engage in share trading or day trading of Australian shares are taxed on Australian-sourced income, but the exact tax treatment depends on whether the activity is considered trading or investing by the Australian Taxation Office (ATO).
Capital Gains Tax (CGT):
- If non-residents are classified as investors, they are subject to CGT only on shares classified as Taxable Australian Property (TAP), such as shares in companies that primarily hold Australian real property.
- For non-TAP shares, non-residents are exempt from CGT.
Ordinary Income:
- If the non-resident’s activities are classified as trading (i.e., operating like a business), profits from share trading are treated as ordinary income and taxed at non-resident income tax rates.
- Non-residents do not benefit from the tax-free threshold, so they are taxed from the first dollar earned at rates starting from 30% up to 45%, depending on income.
Dividend Withholding Tax:
- Dividends received from Australian shares are subject to a withholding tax of 15% or 30%, depending on whether the dividends are fully franked (carry tax credits) or unfranked (no tax credits).
In summary, non-resident share traders in Australia are taxed either on capital gains (if considered an investor) or on ordinary income (if considered a trader). Non-residents also pay withholding tax on dividends. For specific guidance, contact a tax professional.
Are There Any Advantages and Disadvantages For Expats Concerning Capital Gains Tax?
Now that you know if Australian expats need to pay capital gains tax and how they can calculate it, you need to be aware of any advantages and disadvantages they can face because of capital gains tax.
Here are the advantages and disadvantages for expats concerning capital gains tax.
Capital Gains Tax Advantages For Australian Expats
While capital gains tax (CGT) might not seem inherently advantageous for Australian expats, there are some potential benefits to consider, depending on their specific circumstances. However, it’s crucial to understand the limitations and complexities before drawing conclusions.
Here are some potential advantages of CGT for Australian expats.
- Access to the Australian Property Market: CGT allows expats to invest in Australian real estate, which can offer long-term capital appreciation and rental income. This can be attractive for various reasons, such as diversification of assets, hedging against inflation, or future retirement plans.
- Potential for Tax-free Gains: For capital gains made before May 8, 2012, if an expat holds an asset for more than 12 months before disposing of it, they are entitled to a 50% CGT discount. This can significantly reduce the tax burden on long-term capital gains.
- Main Residence Exemption: Under specific conditions, expats can still claim the main residence exemption when selling their former Australian home. This means any capital gain on the property would be entirely tax-free, offering significant savings.
- Deferring Capital Gains: Expats may choose to defer capital gains by rolling over proceeds into another asset within a specific timeframe. This allows them to postpone paying tax until the new asset is eventually disposed of.
Capital Gains Tax Disadvantages For Australian Expats
It’s also important to be aware of the limitations and complexities of CGT for expats, which are as follows.
- Limited Scope: Expats are only subject to CGT on “taxable Australian property,” which mainly includes real estate and business assets in Australia. Other assets like shares or investments may not be subject to Australian CGT for expats.
- Loss of CGT Discount: As mentioned, expats don’t qualify for the 50% CGT discount on capital gains made after May 8, 2012. This can significantly increase the tax burden compared to Australian residents.
- Main Residence Exemption Restrictions: To qualify for the main residence CGT exemption as an expat in 2024, they must have owned the property for at least 12 continuous months and resided in it for at least 300 days during ownership.
- Deemed Disposal Rules: The rules around assets being deemed disposed of when an expat ceases residency are now more complex than in the past. Specific advice should be sought.
- Foreign Resident Capital Gains Withholding: When selling Australian real estate as an Australian tax non-resident, the buyer must withhold 15% of the purchase price and send it to the Australian Taxation Office (ATO). This can create cash flow challenges for expats.
How Can An Australian Expat Manage Their Capital Gains Tax?
Because of the lack of exemption or discount for expat capital gains, you must manage them to avoid paying too much. Here are some ways on how you can manage your capital gains tax.
- Transfer or Gift Some of Your Financial Assets to Your Spouse: Doing this can split the cost of the tax. It is especially recommendable if your partner or spouse has a capital gains exemption on Australian property.
- Sell a Capital Gain in Parts Over Several Tax Years: Doing this over multiple income tax returns means you can pay less each year and save money.
- Offset All of Your Capital Losses (or Some of Them) Against Your Capital Gains: If your total capital losses exceed your total capital gains, you can add the losses to the next payable tax year.
- Deduct Any Costs Related to Your Assets: For example, if you sell an Australian taxable property, you must deduct expenses like stamp duty when calculating your CGT and solicitors fees (if necessary).
- Manage Your Income Tax Rate: Doing this is crucial because your CGT will be high if your income tax rate is high. Conversely, you can lower your CGT by lowering your yearly income tax rate. You can reduce your income tax rate by donating to charity or contributing to your pension (pre-tax).
- Invest in Your Pension or ISA: Investing in an ISA can help you manage your CGT because it is tax-efficient, meaning that all gains into the account are tax-free (this goes the same for a pension, making it another effective option).
- Invest in Other Assets That Aren’t Property: Because of the lack of discount on Australian property CGT, an easy way to avoid it is to invest in assets that aren’t property. Some examples of assets you can invest in that aren’t property include investment funds and items that don’t depreciate in value, like watches.
- Gift Your Assets to a Trust: The trust will cover the asset’s cost if you transfer it to one. However, giving all or some of your assets to a trust can be complex, so contact a financial advisor before committing to it.
- Avoid More Than One Taxing Per Year: You can do this by ensuring you don’t sell all your assets simultaneously. Instead, holding onto some of them for longer can help you avoid more than one taxing.
Does Capital Gains Tax on a Share Have Any Further Implications For an Australian Expat?
Thankfully, once you pay CGT on a share of any type, there are no further significant implications.
For example, there won’t be any extra CGT after you pay for it. You only need to remember to manage your CGT so you don’t pay too much at once. Effectively managing your CGT can help you pay it across multiple tax years.
A Final Summary: How Much Capital Gains Tax Australian Expats Can Expect to Pay on a Share?
Expats should only expect to pay CGT on any share or asset that is Australian taxable property. The amount they can expect to pay will entirely depend on their investments.
To calculate your CGT, either use an online calculator or go through the simple process of subtracting your cost from your net capital gains, repeating this for every asset, and reporting it on your income tax return.
It is essential to remember to manage your CGT so you don’t pay too much. Some ways to do this include purchasing assets that aren’t Australian property, transferring assets to your spouse, and lowering your income tax by donating to charity or adding to your pension.
Selling Australian property this tax season?
Non-resident CGT rules apply differently on your FY2025-26 return.
FAQs about Capital Gains Tax (CGT) on Shares for Australian Non-Residents
Are capital gains taxable for Australian non-residents?
As an Australian non-resident, you should know that not all capital gains are taxable. Buying a share in a foreign company and selling it will not lead you to face CGT. However, remember that you must pay CGT on Australian taxable property.
Are there any Capital Gains Tax exemptions for Australian non-residents?
As of 2024, an Australian expat can’t receive the main residence tax exemption when they sell an Australian property or property share. Additionally, they cannot get any discount on CGT for Australian property (Australian residents get a 50% discount).
What is the typical capital gains tax amount for an Australian expat buying A share?
It’s not possible to say the typical CGT amount for an Australian expat buying a share because it depends on the sale and the total costs. They can subtract their costs from their net capital gain (repeat it for every asset) and report it on their income tax return to calculate it.
Are there ways for an Australian expat to avoid Capital Gains Tax on shares?
The only proper way for an Australian expat to avoid paying CGT on a share is to sell a share that isn’t Australian taxable property because other shares are exempt from CGT. Additionally, you can manage the level of CGT you pay by lowering your income tax, gifting assets to your spouse or trust and more.
Do Australian expats have any advantages concerning Capital Gains Tax?
The primary advantage for Australian expats concerning CGT is that shares that aren’t Australian taxable property aren’t eligible for CGT. Unfortunately, the disadvantage is that there is no discount if they sell an Australian property share (Australian residents get a 50% discount).
Do non-residents pay capital gains tax on shares in Australia?
Yes, non-residents in Australia are subject to Capital Gains Tax (CGT) on the sale of shares only if those shares are in companies that predominantly hold Australian real property (e.g., land or buildings).
Otherwise, non-residents are generally exempt from CGT on the sale of regular shares in Australian companies. This rule applies under the Taxable Australian Property (TAP) provisions, which limit CGT for non-residents to property-related investments.
Do you pay CGT if you are non-resident?
Yes, non-residents pay Capital Gains Tax (CGT) in Australia on Taxable Australian Property (TAP), such as real estate, business assets, or shares in companies that hold Australian property. However, non-residents are generally exempt from CGT on other assets, like shares in Australian companies that do not predominantly hold Australian real property.
What is the TDS on capital gains on shares for non residents?
In Australia, Tax Deducted at Source (TDS) on capital gains for non-residents, specifically related to the sale of Taxable Australian Property (TAP) like shares in property-related companies, is managed through withholding taxes. Typically, when non-residents sell such assets, 15% of the sale price is withheld by the buyer and remitted to the Australian Taxation Office (ATO) as a prepayment of CGT.
This withholding ensures that non-residents meet their tax obligations, and the actual CGT liability is calculated when the tax return is lodged.
