This article contains general information only and does not constitute personal tax advice. You should seek advice from a Registered Australian Tax Agent before making decisions based on this content.
When an Australian expat sells a property, the taxable capital gain is not simply the sale price minus the original purchase price. The cost base is the legally defined starting point, and for non-residents, getting it wrong can mean either overpaying tax or triggering ATO scrutiny. The cost base of a property consists of up to five distinct elements under Australian tax law, and knowing precisely which expenses qualify, which are excluded, and how the rules shift when you become a non-resident is the difference between an accurate return and an expensive mistake [1].
TL;DR: Key Takeaways
- The cost base has five legal elements; non-residents can generally include all five, but common expenses like interest and depreciation are excluded.
- Non-residents do not qualify for the 50% CGT discount (2025-26 financial year) on most assets, which makes a precise cost base even more critical to reducing taxable gain [4].
- If you were once a resident, the date you became a non-resident may reset the cost base to market value under “deemed disposal” rules.
- The main residence CGT exemption is effectively unavailable to foreign residents at the time of sale, with narrow life-event exceptions [2].
- Draft legislation released in April 2026 proposes further tightening of the foreign resident CGT regime; it has not yet been enacted, and record-keeping is essential regardless of its final form [3].
What Is the Cost Base and Why Does It Matter More for Non-Residents?
The cost base is the figure you subtract from your capital proceeds to arrive at your assessable capital gain. A larger, accurately constructed cost base directly reduces your taxable profit. For Australian residents, the 50% CGT discount (2025-26 financial year) then halves any remaining gain on assets held longer than 12 months. For non-residents, that discount is largely unavailable, so the cost base carries far more weight in the final tax calculation [4].
Under Australian tax law, the cost base has five elements:
| Element | What It Covers | Non-Resident Eligible? |
|---|---|---|
| 1. Purchase price | The original acquisition cost of the property | Yes |
| 2. Incidental acquisition costs | Stamp duty, legal fees, agent fees at purchase | Yes |
| 3. Ownership costs | Rates, body corporate fees (only if no income deduction was claimed) | Conditional |
| 4. Capital improvement costs | Renovations, additions that increase the asset’s value | Yes |
| 5. Incidental disposal costs | Real estate agent commissions, legal fees at sale | Yes |
Which Costs Can Non-Residents Actually Include in the Cost Base?
Building on the five elements above, the practical question is which specific costs survive ATO scrutiny when you are a non-resident seller. The answer depends largely on whether those costs were previously claimed as tax deductions [1].
Costs you can generally include:
- Purchase price paid at settlement
- Stamp duty paid at acquisition
- Conveyancing and legal fees at both purchase and sale
- Real estate agent commissions at sale
- Building and pest inspection fees paid at purchase
- Capital improvements (e.g. a new kitchen, extension, structural work) that were not previously deducted as repairs
- Costs of establishing title (e.g. title search fees)
Costs you cannot include:
- Mortgage interest payments (these are revenue deductions, not cost base items)
- Depreciation claimed on building or plant and equipment (claimed depreciation actually reduces the cost base)
- Repairs and maintenance deducted in prior tax returns
- Property management fees and council rates, if previously deducted
- Borrowing costs previously deducted over the loan term
A common error is treating all money spent on a property as part of the cost base. If an expense reduced your taxable income in a prior year, it almost certainly cannot also reduce your capital gain.
What Happens to the Cost Base When You Become a Non-Resident?
Stepping back from the line-by-line cost analysis, a structurally different issue arises for expats who owned property as Australian residents before departing. When an individual ceases Australian tax residency, a deemed disposal may occur for certain assets. For real property that qualifies as Taxable Australian Property (TAP), the deemed disposal rules typically do not apply, and the original cost base is preserved. However, the date of departure remains critical for calculating the discount fraction applied to any gain [4].
For assets that are not TAP (for example, shares in non-land-rich foreign companies), a deemed disposal at market value on the date of departure can apply, effectively resetting the cost base to that market value. Whether an asset is classified as TAP or non-TAP is a frequent source of error and should be confirmed with a Registered Australian Tax Agent [5].
How Does the Loss of the CGT Discount Change the Math?
Related to but distinct from the cost base question is the discount issue, because even a well-constructed cost base cannot fully substitute for the discount. Non-resident individuals are not entitled to the 50% CGT discount (2025-26 financial year) on capital gains accrued during periods of non-residency [4]. For assets held partly as a resident and partly as a non-resident, only a proportionate discount fraction (representing the resident period) may apply.
Draft legislation released in April 2026 proposes a time-limited 50% CGT discount (as proposed for the 2025-26 financial year and forward) for eligible foreign resident entities such as companies and trustees, but this proposal has not yet been enacted and does not extend to individual non-resident taxpayers in the same way [3] [7]. The rules remain under development, and the regime is only becoming more complex.
Can Non-Residents Still Claim the Main Residence Exemption?
The main residence exemption is, for most non-residents, no longer available. Since 2020, foreign residents at the time of sale cannot apply the main residence CGT exemption unless they satisfy narrow life-event conditions: the property is sold within six years of becoming a foreign resident, and during that period the individual (or their spouse or minor child) experienced a death, divorce, or serious illness [2] [6]. These conditions are strict, and failing to meet them means the entire gain from what was once your family home is fully assessable.
Frequently Asked Questions
Can I include stamp duty in the cost base if I paid it overseas?
Yes. Stamp duty paid in Australia at acquisition is an incidental acquisition cost and forms part of Element 2 of the cost base, regardless of where you were living at the time of purchase [1].
Does the Foreign Resident CGT Withholding (FRCGW) amount reduce my cost base?
No. The amount withheld by the buyer at settlement is a payment toward your final CGT liability, not a cost base item. It is credited against tax owing when you lodge your return, and any excess is refunded. Note that withholding rates are subject to change; confirm the current rate for the relevant financial year with a Registered Australian Tax Agent.
If I renovated my property while living abroad, can I include renovation costs?
Yes, provided the renovation costs represent genuine capital improvements (not repairs) and were not previously claimed as deductions. Renovations that add lasting value to the property generally qualify as Element 4 of the cost base [1].
What records do I need to substantiate my cost base?
The ATO requires records to be kept for five years after the CGT event. You should retain original purchase contracts, stamp duty receipts, legal invoices, building quotes and invoices for capital works, and agent commission statements at sale.
Can my accountant in Australia estimate the cost base if I have lost some receipts?
The ATO requires substantiation for cost base claims. If records are incomplete, a registered tax agent can assist with reconstructing documentation using bank statements, council records, and contractor invoices, but estimates without supporting evidence carry audit risk.
Does draft legislation from April 2026 affect my existing property’s cost base?
The April 2026 draft legislation primarily targets the definition of Taxable Australian Property and the CGT discount available to certain foreign resident entities [3] [5]. This legislation has not yet been enacted. Individual non-residents should monitor developments closely, as retrospective elements have been flagged in the proposals.
I lived in the property before departing Australia. Does the main residence exemption cover any part of my gain?
It may, but only under the strict life-event conditions introduced after 2020, or if the sale occurred during the limited window before those rules took full effect. Without meeting those conditions, the exemption does not apply to foreign residents at the date of sale [2].
About ODIN TaxODIN Tax is a Registered Australian Tax Agent and Australia’s specialist tax practice exclusively serving Australian expats and non-residents, operating as part of the ODIN Group. Headquartered in Hong Kong and serving clients across 40+ countries, ODIN Tax prepares Australian tax returns, calculates CGT for property and shares, and advises on tax residency, the Foreign Resident CGT Withholding regime, and Double Tax Agreement applications. Unlike generalist accounting firms, every ODIN Tax client and every ODIN Tax process is built around the non-resident tax landscape, including the nuanced cost base and discount rules that determine how much tax an expat actually pays when selling Australian property. ODIN Tax is part of the ODIN Group, which also includes mortgage broking services for Australian expats.
Selling Australian property from overseas? A poorly constructed cost base can cost you far more than an accountant ever would. The ODIN Tax team has calculated non-resident CGT cost bases for thousands of Australian expats across every major expat corridor.
Talk to ODIN Tax today at odintax.com and make sure your cost base is working as hard as your property did.
Disclaimer: This article contains general information only and does not constitute personal tax advice. Tax rules applicable to non-residents and Australian expats are complex and depend on individual circumstances. You should seek advice from a Registered Australian Tax Agent before making decisions based on this content. Information is current as at the 2025-26 financial year and is subject to legislative change, including draft measures released in April 2026 that have not yet been enacted.
References
- Cost base of assets (ato.gov.au)
- Foreign residents and main residence exemption (ato.gov.au)
- Government releases draft legislation to strengthen the foreign resident CGT regime (www.pwc.com.au)
- Foreign residents and the CGT discount (ato.gov.au)
- Significant and retrospective changes to Australia’s taxable Australian property laws: draft legislation released – Corrs Chambers Westgarth (www.corrs.com.au)
- Life events and the main residence exemption (ato.gov.au)
- Access Denied (www.taxathand.com)
