TL;DR
- Under the Foreign Resident Capital Gains Withholding rules, 15% of your gross sale price (as applicable for the 2025-2026 financial year) will be withheld at settlement unless you apply for a variation or clearance certificate in advance.
- Non-residents lose the CGT discount available to Australian residents (50% for the 2025-2026 financial year for assets held more than 12 months), significantly increasing taxable gains.
- Tax residency status must be formally confirmed before sale, as it determines which CGT rules apply and whether any exemptions are available.
- Applications, lodgments, and ATO clearances can take months to process, making early engagement with a specialist non-negotiable.
- Getting the sequence right, not just the numbers, is what separates a clean sale from a costly one.
Why Does Timing Matter So Much for Non-Resident Property Sellers?
The core problem is not the tax itself; it is the administrative sequence. When a non-resident sells Australian property, the ATO’s withholding regime and CGT rules activate simultaneously, and each has its own deadlines, applications, and lodgment requirements. Miss one step and you either lose cash at settlement or face interest and penalties after the fact.
Under the Foreign Resident Capital Gains Withholding (FRCGW) regime, where no clearance certificate is provided by the seller, the buyer is required to withhold 15% of the gross sale price and remit it to the ATO (rate applicable for the 2025-2026 financial year; refer to ATO published guidance for current rates). That is not 15% of your profit; it is 15% of the total contract price. On a $1.2 million apartment, that is $180,000 held back at settlement regardless of what your actual CGT liability is. Retrieving it requires lodging a tax return, and refunds can take months.
The remedy, a withholding variation application, must be filed with the ATO well before settlement. Processing times can run from three to six months depending on the complexity of the transaction, based on ATO guidance. That means the planning clock starts not at signing a contract but at least two financial quarters before you even list.
What Is the Recommended Pre-Sale Timeline?
Building on the withholding risk above, the harder question is not what to do but when to do each step. The table below outlines the ODIN Tax recommended sequence.
| Timeframe Before Settlement | Action Required | Why It Cannot Wait |
|---|---|---|
| 12+ months | Confirm tax residency status formally | Determines CGT discount eligibility and which rules apply to the entire gain |
| 9-12 months | Model CGT exposure (cost base, holding period, depreciation clawback) | Informs whether to sell now, delay, or restructure before listing |
| 6-9 months | Resolve overdue tax return lodgments | Outstanding lodgments complicate withholding variation applications and ATO clearances |
| 3-6 months | Lodge FRCGW variation application | ATO processing can take 3-6 months per ATO guidance; late applications mean full withholding at settlement |
| 1-3 months | Confirm settlement mechanics with conveyancer and tax agent | Ensures buyer’s solicitor has correct withholding instructions on the day |
| Post-settlement | Lodge Australian tax return including CGT event | Required to reconcile actual liability and claim any refund of withheld amounts |
How Does Non-Resident Status Change the CGT Calculation?
Stepping back from the procedural sequence, a separate concern is understanding exactly how much CGT exposure you are dealing with as a non-resident. The number is materially higher than most sellers expect.
- No CGT discount for non-residents: Australian tax residents who hold a property for more than 12 months can access a CGT discount (50% for the 2025-2026 financial year). Non-residents cannot access this discount on assets acquired after 8 May 2012. The full nominal gain is assessable.
- Principal place of residence exemption is severely restricted: Non-residents generally cannot access the main residence exemption at the time of sale, with limited transitional provisions that expired on 30 June 2020.
- The cost base still applies: You can reduce the gain by the original purchase price, acquisition costs, capital improvements, and certain holding costs. Accurate records are essential.
- Depreciation clawback: If you claimed depreciation deductions on the property while renting it out, those amounts can reduce your cost base, increasing the assessable gain.
For context, a non-resident who purchased a Sydney investment property in 2015 for $700,000 and sells in 2026 for $1.2 million faces a nominal gain of $500,000 (before cost base adjustments), fully assessable at the applicable non-resident marginal tax rate for the 2025-2026 financial year, with no CGT discount applied.
What Happens If You Have Not Filed Australian Tax Returns for Several Years?
A related but distinct question that ODIN Tax regularly encounters: many non-residents stop filing Australian tax returns after moving overseas, either because they believe they are no longer required to or because the task gets deferred year after year. Outstanding lodgments create two specific problems in a property sale context.
- The ATO may flag overdue returns during the withholding variation process, complicating or delaying approval.
- If rental income was earned and not declared, penalties and interest will compound the CGT bill at the worst possible time.
Resolving overdue lodgments before initiating the sale process is not optional; it is foundational. ODIN Tax handles backdated lodgments across multiple years, including engaging with available ATO administrative processes for late lodgments where applicable, which is why the 6-9 month window in the timeline above is dedicated to this step.
Should You Sell Before or After Moving Back to Australia?
Timing the sale relative to a return to Australia is one of the most consequential decisions a non-resident property owner can make. If you sell before re-establishing Australian tax residency, you sell as a non-resident and cannot access the CGT discount available to residents (50% for the 2025-2026 financial year for assets held more than 12 months). If you sell after re-establishing residency, the discount may be available, but the residency transition itself introduces complexity.
Planning the timing of a sale relative to a change in residency status is a well-established consideration in this area. The critical caveat is that each individual’s residency status turns on specific facts assessed under ATO rules, including the Resides Test, Domicile Test, and 183-Day Test. Residency can also carry legal dimensions; ODIN group is not a law firm. The appropriate answer depends entirely on those facts, which is why this content is general information and not a substitute for formal advice from a Registered Australian Tax Agent.
Frequently Asked Questions
About ODIN Tax
ODIN Tax is Australia’s specialist tax agent practice for Australian expats and non-residents, and a Registered Australian Tax Agent. Part of the ODIN group alongside ODIN Mortgage, ODIN Tax provides integrated mortgage broking and tax compliance services so that tax strategy is built into the property plan from the outset rather than added at the last minute. Headquartered in Hong Kong and serving clients across 40+ countries, ODIN Tax has helped more than 10,000 Australian expats navigate non-resident CGT, FRCGW, tax residency determinations, and overdue lodgments. With a 4.9/5 Google rating from over 330 verified client reviews, ODIN Tax brings depth of specialist knowledge that generalist accountants operating in this space regularly cannot match.
Selling an Australian investment property as a non-resident? The timeline starts earlier than you think.
References
- Foreign resident capital gains withholding (ato.gov.au)
- Clearance certificates for foreign resident capital gains withholding (ato.gov.au)
- Variation of withholding amount (ato.gov.au)
- CGT discount (ato.gov.au)
- Foreign residents and main residence exemption (ato.gov.au)
