TL;DR
- Non-residents lose the 50% CGT discount on gains accrued during non-resident periods, fundamentally changing the numbers compared to an Australian resident seller [1].
- A partial main residence exemption applies based on the proportion of time the property was your principal place of residence [3].
- The calculation method (indexation, discount, or neither) depends on when the property was acquired and what residency status applied at each stage [2].
- A 15% Foreign Resident CGT Withholding now applies to all property sales by foreign residents, regardless of the property’s value, and must be accounted for at settlement [5].
- This is one of the most technically complex CGT calculations in the Australian tax system – specialist advice from a registered Australian tax agent is strongly recommended.
Why Is This Calculation So Complex for Non-Residents?
Unlike a straightforward investment property sale, a mixed-use property forces the ATO to apply different tax treatments to different periods of ownership. As a non-resident, you do not simply lose a single concession – you face the overlapping removal of the full main residence exemption, the 50% CGT discount (for the period you were a non-resident), and potential exposure to withholding at settlement [1][5]. Every variable – the dates you moved in, moved out, left Australia, and eventually sold – feeds directly into the final taxable figure.
What Is the Main Residence Exemption, and How Does It Apply Partially?
The main residence exemption can reduce or eliminate CGT on a property that was your principal place of residence, but it only applies in proportion to the time the property was actually used as your home relative to the total ownership period [3].
The core formula for the partial exemption is:
- Exempt portion = (Days as main residence / Total days owned) x Capital Gain
- Assessable portion = Total Capital Gain minus Exempt Portion
Critically, non-residents face an additional constraint: since 9 May 2017, non-residents at the time of sale are generally denied the main residence exemption entirely unless they meet specific life events criteria (terminal illness, death, or divorce) [3]. This is a hard rule that catches many expats off guard – even if you lived in the property for years before leaving Australia, your non-resident status at the time of sale typically eliminates the exemption.
How Does the Loss of the 50% CGT Discount Change the Numbers?
Building on the exemption issue above, the 50% CGT discount is a second major concession that non-residents lose – at least in part. For properties held for more than 12 months, Australian residents can halve the assessable capital gain. Non-residents cannot apply this discount to gains accrued during any period of non-residency [1][2].
Where a property has been held across both a resident and non-resident period, the ATO requires the gain to be apportioned:
- The portion of the gain accrued while you were an Australian resident may still qualify for the 50% discount.
- The portion of the gain accrued during non-resident periods does not qualify for the discount [2].
In practice, for Australian real property, the ATO requires the 50% CGT discount to be apportioned on a pro-rata basis based on the number of days the owner was an Australian resident versus a foreign resident during the total ownership period [1].
How Do You Actually Calculate the Taxable Gain Step by Step?
The following framework applies to a property that was: (1) purchased while the owner was an Australian resident, (2) used as a main residence for a period, (3) then rented out, (4) and eventually sold as a non-resident [4].
| Step | Action | Notes |
|---|---|---|
| 1 | Calculate total capital gain | Sale price minus cost base (purchase price + eligible costs) [4] |
| 2 | Determine the proportion of days as an Australian resident versus foreign resident during the total ownership period | Establishes the pro-rata split for applying the 50% CGT discount [1] |
| 3 | Apply partial main residence exemption (if eligible) | Likely nil for non-residents at time of sale under post-2017 rules [3] |
| 4 | Apply 50% discount to resident-period gain only | Non-resident period gain receives no discount [2] |
| 5 | Add discounted gain to assessable income | Taxed at non-resident marginal rates (no tax-free threshold) [5] |
| 6 | Account for 15% FRCGW | Withheld at settlement on all property sales by foreign residents [5] |
What Is the 15% Foreign Resident CGT Withholding and How Does It Fit In?
Stepping back from the gain calculation itself, a separate compliance obligation exists at the point of settlement. The Foreign Resident Capital Gains Withholding (FRCGW) regime requires the buyer to withhold 15% of the gross purchase price and remit it directly to the ATO when the property is sold by a foreign resident. As of 1 January 2025, the previous price threshold was removed and the 15% withholding rate now applies to all relevant property transactions, regardless of the purchase price [5].
- This is not a final tax – it is a prepayment credited against your actual CGT liability when you lodge your tax return.
- If your actual CGT liability is less than the amount withheld, you receive a refund via your tax return.
- If your actual CGT liability exceeds the amount withheld, you pay the shortfall.
- To avoid withholding, the seller would need to obtain a clearance certificate from the ATO prior to settlement, which is not available to foreign residents [5].
Frequently Asked Questions
About ODIN Tax
ODIN Tax is Australia’s specialist tax agent practice for expats and non-residents, part of ODIN alongside ODIN Mortgage. As a Registered Australian Tax Agent headquartered in Hong Kong, ODIN Tax has served 2,300+ Australian expats across 40+ countries, delivering tax return preparation, CGT calculations, tax residency determinations, and overdue lodgment resolution. What sets ODIN Tax apart is its position within ODIN: tax strategy is built into property acquisition and sale planning from day one, not handled in isolation. For complex scenarios like mixed-use property CGT, that approach ensures consistency and accuracy across all planning stages.
Navigating a mixed-use property sale as a non-resident?
The calculation described in this article involves multiple intersecting rules, and the cost of getting it wrong is a larger tax bill or an ATO compliance issue. The team at ODIN Tax handles exactly these scenarios every day, for Australian expats in Hong Kong, Singapore, the UAE, the UK, and 40+ other countries.
Talk to ODIN Tax today at www.odintax.com to get your CGT position assessed by a specialist who knows non-resident property tax inside and out.
References
- CGT exemption for non-residents | BT Professional (www.bt.com.au)
