Complete Guide: Capital Gains Tax (CGT) on Shares for Australian Non-Residents

Buying and selling shares is a widely accepted and popular way of making money in the current financial market; this includes any item you buy and sell after it increases in value.

However, for specific items of this nature, Australian residents will face capital gains tax, but what about Australian expats?

Keep reading to learn whether Australian expats need to pay capital gains tax on shares if they face any advantages concerning capital gains tax, how they can manage the amount of capital gains tax they pay and more.

What Is Capital Gains Tax (CGT)?

Capital gains tax is a tax explicitly targeting items or shares you sell after they increase in value. Specifically, the government taxes you on any profits (called a capital gain) you make after the sale, meaning they don’t take the tax off your total amount.

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.

Can An Australian Expat Face Capital Gains Tax on a Share?

Australian expats don’t have to pay capital gains tax on all shares. The only time an Australian expat will need to pay capital gains tax is when they make a capital gain on a piece of Australian taxable property.

We can broadly define Australian taxable property as any land-rich property with an ownership interest of 10% or over.

Unfortunately, although the number of share types on which expats need to pay capital gains tax is minimal, they don’t receive any CGT discount. Australian residents can claim a 50% CGT discount on qualifying capital gain profits; expats do not get this luxury, making it a significant disadvantage.

Complete Guide: Capital Gains Tax (CGT) on Shares for Australian Non-Residents

What Is the Non-Resident Share CGT Amount If There Is One?

Your capital gains tax as an Australian expat will entirely depend on the capital gain you make on the share you sell. You will pay more capital gains tax if you make a more significant capital gain.

You must make the correct calculations to determine how much capital gains tax you must pay after selling a share.

Thankfully, you will pay no capital gains tax on any share that isn’t on Australian taxable property, so if you only sell specific shares, you won’t have to pay any capital gains tax.

How Can an Australian Expat Calculate Capital Gains Tax on a Share?

Calculating your capital gains tax on a share can be a long and complicated process, which is why there are sites to help you calculate it; these sites will have a toggle list dropdown button containing all the relevant steps to calculate your capital gains tax (some sites can also give professional advice on how to manage CGT).

However, you might want to calculate it yourself instead of relying on a website, so here are the steps to work it out.

  • Calculate your net capital gains minus the cost. You must remember that the taxable part of your capital gain is the profit you make from it, not the total. Therefore, to correctly calculate the net capital gains from your share sale, you need to calculate the total amount you received from the asset (the capital gain), calculate the cost of it, and then minus the cost from the total amount.
  • Repeat this process for every asset you sold during that year. You must make these exact calculations for your other capital gains to determine your total net capital gains.
  • Calculate all your yearly capital losses to calculate if you have a net capital gain or a net capital loss. Stop the process if you conclude that you made a net capital loss (from multiple capital losses) in that year.
  • Report the net capital gain or net capital loss on your next income tax return.

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; they must do this before reporting their net capital gain or capital loss.

Complete Guide: Capital Gains Tax (CGT) on Shares for Australian Non-Residents

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 worth over $750,000, the buyer must withhold 12.5% 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 CTG, 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 CTG on a share of any type, there are no further significant implications.

For example, there won’t be any extra CTG after you pay for it. You only need to remember to manage your CTG so you don’t pay too much at once. Effectively managing your CTG can help you pay it across multiple tax years.

Complete Guide: Capital Gains Tax (CGT) on Shares for Australian Non-Residents

A Final Summary: How Much Capital Gains Tax Australian Expats Can Expect to Pay on a Share?

Expats should only expect to pay CTG 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 CTG, 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 CTG 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.

Frequently Asked Questions

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 CTG. However, remember that you must pay CTG on Australian taxable property.

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).

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.

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.

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).

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