When an Australian property is jointly owned by co-owners with different tax residency statuses, the ATO does not apply a single tax treatment to the whole asset. Instead, it assesses each owner’s capital gain separately, based on their individual residency status at the time of the sale. This means a resident co-owner may access the 50% CGT discount on their share while a non-resident co-owner does not. The liability is split, the rules differ, and getting the calculation wrong is a costly mistake that generalist accountants make more often than most people realise.
TL;DR
- The ATO taxes each co-owner’s capital gain individually based on their own tax residency status at sale, not a blended rate across owners.
- Non-resident co-owners lose access to the 50% CGT discount on Australian property and are taxed at non-resident marginal rates on their full capital gain [1].
- Ownership structure (joint tenants vs. tenants in common) determines how the gain is apportioned between co-owners [3].
- The 15% Foreign Resident Capital Gains Withholding (FRCGW) applies to the non-resident’s portion of the sale price, not only the gain [2].
- 2025 legislative changes have tightened the FRCGW regime, removing exemptions that previously applied to lower-value properties [2][5].
How Does the ATO Apportion a Capital Gain Between Co-Owners?
The ATO’s foundational rule is straightforward: each owner calculates their own capital gain based on their proportional ownership interest, then applies the tax rules relevant to their own residency status [3]. There is no “averaging” of residency across co-owners, and no blended discount rate. The property is one asset, but the tax event is assessed individually.
Ownership structure determines the proportional split:
| Ownership Structure | How Gain Is Split | Key Consideration |
|---|---|---|
| Joint Tenants | Equally between all owners regardless of contribution | Equal split is assumed; no flexibility to vary proportions [3] |
| Tenants in Common | According to each owner’s registered ownership percentage | Shares can be set unequally at purchase; must be documented [3] |
This distinction matters enormously in mixed-residency scenarios. If a resident and non-resident own a property as tenants in common with an 80/20 split favouring the resident, the non-resident’s taxable gain is proportionally smaller. That structuring decision, made at purchase, has lasting CGT implications.
What CGT Rules Apply to the Non-Resident Co-Owner’s Share?
Building on the apportionment above, the harder question is which tax rules apply once the non-resident’s share of the gain is isolated. The answer is materially less favourable than what applies to an Australian resident.
For the non-resident co-owner [1]:
- The 50% CGT discount available to resident individuals after 12 months of ownership does NOT apply.
- The full capital gain is assessed at non-resident marginal tax rates, which start at a higher effective rate than resident rates because non-residents do not have access to the tax-free threshold. Non-resident marginal rates apply without the benefit of a tax-free threshold. This article references rates applicable to the 2025-26 financial year; rates vary by financial year and should be confirmed with a tax professional before making decisions.
- The gain is calculated only on Australian real property or assets with a “necessary connection” to Australia [4].
For the resident co-owner, standard CGT rules apply: the 50% discount is available if the asset was held for more than 12 months, and the gain is added to their assessable income at their marginal rate.
The practical result: a 50/50 jointly owned property sold with a $400,000 total capital gain produces two $200,000 gain assessments. The resident co-owner, after the 50% discount, may include only $100,000 in assessable income. The non-resident co-owner’s assessable income includes their $200,000 share of the gain. This represents a material difference in tax outcomes for each owner.
How Does the 15% Foreign Resident CGT Withholding Apply to Co-Owned Properties?
A separate but related obligation applies at settlement. The Foreign Resident Capital Gains Withholding (FRCGW) regime requires the purchaser of an Australian property to withhold a portion of the purchase price and remit it to the ATO when a vendor is a non-resident [2].
Key points in a co-ownership context:
- FRCGW applies to the non-resident vendor’s share of the contract price, not to the resident co-owner’s share.
- As of changes effective in 2025, the withholding rate is 15% of the non-resident’s portion of the gross sale price, applied before any deduction for the cost base [2].
- The $750,000 property value threshold that previously exempted lower-value properties from FRCGW has been removed [2][5]. Every sale involving a non-resident vendor now triggers the withholding obligation regardless of price.
- The resident co-owner is not subject to FRCGW on their portion, provided they can demonstrate resident status to the purchaser.
The FRCGW is a prepayment of CGT, not an additional tax. The non-resident vendor reconciles it when lodging their Australian tax return. However, because it is calculated on the gross sale price rather than the net gain, it can significantly affect cash flow at settlement, particularly where the property has a high cost base relative to the sale price.
What Changed in 2025 That Co-Owners Need to Know?
Stepping back from the mechanics of per-owner assessment, a significant policy shift occurred in 2025 that affects every non-resident co-owner of Australian property. The Australian government deferred the implementation of broader proposed CGT changes for foreign residents while simultaneously moving forward with the removal of the FRCGW property value threshold [5].
What this means practically:
- The 15% withholding rate now applies to ALL Australian property sales involving a non-resident vendor, regardless of the property’s value [2].
- Non-residents can no longer rely on a low property price to avoid the FRCGW obligation.
- Broader proposed measures, including changes to how foreign residents access the CGT discount on certain assets, had their start date deferred pending further consultation [5]. The legislative position in this area should be confirmed at the time of any transaction.
Frequently Asked Questions
About ODIN Tax
ODIN Tax is Australia’s specialist tax agent practice for expats and non-residents, and a Registered Australian Tax Agent. Part of the ODIN Group alongside ODIN Mortgage, ODIN Tax has served 10,000+ Australian expats across 40+ countries, with a Tax Director bringing over a decade of specialist experience in non-resident CGT, tax residency determinations, and cross-border tax compliance. ODIN Tax specialises exclusively in non-resident tax services, meaning every practitioner and every process is calibrated for exactly the complexities this article describes. Headquartered in Hong Kong, ODIN Tax is built around where expats actually live, not where most accounting firms are comfortable working.
Selling Australian property as a non-resident, or navigating a co-ownership sale where residency statuses differ? ODIN Tax can calculate your correct CGT liability, manage your FRCGW obligations, and lodge your Australian tax return.
References
- A Guide to Capital Gains Tax for Australian Expats (titanwealthinternational.com)
- Key 2025 changes to Australia’s Foreign Resident Capital … (gsbglobal.com)
- Joint Tenants vs Tenants in Common – What’s the Difference? – Property Tax Specialists Australia (propertytaxspecialists.com.au)
- Dentons – International Tax Guide to Real Estate Investment in Australia (www.dentons.com)
- Australia’s Federal Budget 2025-26: key takeaways (www.internationaltaxreview.com)
