TL;DR – Key Takeaways
- Non-residents cannot access the 50% CGT discount on gains that accrue during their period of non-residency.
- The ATO uses a market-value uplift (or time-based apportionment) at the date you become a non-resident to separate the resident and non-resident portions of the gain.
- Selling before you formally become a non-resident – while still an Australian tax resident – preserves the full discount if the asset has been held for more than 12 months.
- The 15% Foreign Resident CGT Withholding (FRCGW) regime adds a cash-flow complication on top of the discount issue for property transactions.
- Getting the timing wrong by even a few weeks can shift tens of thousands of dollars in tax liability.
What Is the 50% CGT Discount and Who Can Use It?
The 50% CGT discount is a concession available to Australian tax residents who have held a CGT asset – most commonly property or shares – for more than 12 months before disposing of it. Rather than paying tax on the full capital gain, a resident individual can reduce that gain by half before applying their marginal tax rate.
For non-residents, the position is materially different. Under current ATO rules, the 50% discount is not available on any portion of a capital gain that accrues during a period of non-residency. The critical word is “accrues” – it is not simply about your residency status on the day of sale. It is about when the gain was generated.
How Does the ATO Apportion the Gain Between Resident and Non-Resident Periods?
When a non-resident sells an asset they originally acquired as a resident, the ATO requires the total capital gain to be split into two portions:
- Resident-period gain: The gain that accrued while you were an Australian tax resident. This portion retains access to the 50% discount (subject to the 12-month holding rule).
- Non-resident-period gain: The gain that accrued from the date you ceased being a resident to the date of sale. This portion receives no discount and is taxed in full at non-resident marginal rates.
The ATO’s preferred method for this split is to establish the market value of the asset at the date of departure – the point you became a non-resident. The gain up to that date is the resident-period gain; the gain from that date forward is the non-resident-period gain.
| Gain Component | 50% Discount Available? | Tax Rate Applied |
|---|---|---|
| Gain accrued during Australian residency | Yes (if asset held 12+ months) | Non-resident marginal rate on discounted amount |
| Gain accrued during non-residency period | No | Non-resident marginal rate on full gain |
Why Does the Timing of Your Sale Matter So Much?
Consider two scenarios involving the same property, the same purchase price, and the same eventual sale price. In Scenario A, the seller disposes of the property before leaving Australia – while still an Australian tax resident. In Scenario B, the seller delays the sale until after relocating overseas.
In Scenario A, the entire gain is a resident-period gain. The 50% discount applies, and the taxable gain is halved. In Scenario B, only a portion of the gain attracts the discount. The longer the property is held after departure, the greater the non-resident-period gain, and the higher the overall tax bill.
This is not a marginal difference. On a property with a substantial capital gain, the additional tax from losing even a portion of the 50% discount can run into tens of thousands of dollars. Timing the sale to occur before departure – where practically possible – is one of the most direct levers available to reduce CGT exposure.
What Is the Deemed Disposal Rule and When Does It Apply?
There is a related CGT rule that applies at the moment you become a non-resident, known as the deemed disposal rule (or “deemed CGT event”). When you cease being an Australian tax resident, the ATO treats you as having disposed of certain assets – notably assets that are not “taxable Australian property” (TAP) – at their market value on the date of departure.
Importantly, Australian real property (and property-related interests) qualifies as taxable Australian property and is therefore excluded from the deemed disposal rule. This means:
- Australian real estate is not subject to deemed disposal on departure.
- It remains within the Australian tax net regardless of where you live.
- The CGT discount apportionment described above applies when the property is eventually sold.
By contrast, Australian shares in non-listed companies or foreign assets may trigger the deemed disposal at departure. Each asset class needs to be assessed separately.
How Does Foreign Resident CGT Withholding Add to the Complexity?
Beyond the discount question, non-residents selling Australian property face an additional compliance layer: Foreign Resident CGT Withholding (FRCGW). Under this regime, the purchaser of Australian property from a foreign resident is required to withhold a portion of the purchase price and remit it directly to the ATO at settlement.
Key points about FRCGW:
- The withholding is applied to properties above the relevant threshold under current ATO rules.
- Withholding is not a final tax – it is a prepayment credited against your assessed CGT liability when you lodge your return.
- If your actual CGT liability is lower than the amount withheld, you receive a refund. If it is higher, you pay the shortfall.
- Sellers can apply for a variation to the withholding rate if their actual liability differs significantly from the default rate.
FRCGW does not change how the discount apportionment works – but it does mean cash is tied up at settlement, which has real implications for property chains and refinancing.
Frequently Asked Questions
About ODIN TaxODIN 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, ODIN Tax operates across 40+ countries and has served over 10,000 Australian expats, with a focus on high-stakes tax matters including CGT apportionment, tax residency determinations, and FRCGW compliance. ODIN Tax is uniquely positioned within the ODIN Group alongside Odin Mortgage, meaning tax strategy is coordinated with property acquisition and mortgage structuring from the outset – not treated as an afterthought at settlement. For expats navigating the complexity of selling Australian property from overseas, that integration makes a material difference.
Selling Australian property from overseas? The timing of your sale and your residency status at settlement can significantly affect your CGT outcome.
Speak with the ODIN Tax team – specialists in non-resident CGT, discount apportionment, and FRCGW – before you sign a contract.
