Unused capital losses from an earlier Australian property sale do not disappear once you leave the country or move on to a new asset. If you are a non-resident for tax purposes, a net capital loss from a previous sale of taxable Australian property can be carried forward indefinitely and applied against the capital gain on a second property sale, before any discount calculation and before working out what, if anything, is owed to the ATO. The catch is that these losses can only offset capital gains, not your salary, rental income or other assessable income, and non-residents do not get the 50% CGT discount that Australian residents receive on gains accrued after 8 May 2012. Getting this sequencing wrong is one of the more common and costly errors expats make when they sell a second Australian property from overseas.
TL;DR
- Net capital losses from a prior Australian property sale carry forward indefinitely for non-residents; there is no expiry date under current ATO guidance.
- Carried-forward losses must be applied against a capital gain before any discount is calculated, and cannot reduce other income like wages or rent.
- Non-residents generally get 0% CGT discount on gains accrued after 8 May 2012, unlike the 50% discount available to residents.
- Foreign Resident CGT Withholding (FRCGW) of 15% applies to sale contracts, and now applies to all property values for contracts signed from 1 January 2025, regardless of price.
- A withholding deduction at settlement is not the same as your final tax liability. Carried-forward losses are applied when you lodge your return, which is often the only way to recover excess withholding.
About ODIN Tax: ODIN Tax is a Registered Australian Tax Agent practice built specifically for Australian expats and non-residents. The team has prepared returns and CGT calculations for 2,300+ Australian expats across 40+ countries, including many with multiple Australian property sales spanning several income years.
How Does Carrying Forward a Capital Loss Actually Work?
A capital loss arises when you sell an asset for less than its cost base, and under Australian tax law it can only be offset against a capital gain, never against other income such as salary or rental profits. If you have no capital gain in the year the loss occurs, the loss does not vanish. It becomes a carry-forward capital loss, sitting on your tax record until a future capital gain is available to absorb it. Under current ATO rules there is generally no time limit on this: a non-resident, just as much as a resident, can carry forward a net capital loss indefinitely until it is fully used up, though accurate records are needed to apply it correctly. Think of it like a stored credit rather than a one-time deduction. It sits inert until the right kind of transaction (another capital gains event on taxable Australian property) comes along to draw it down.
What Happens When You Sell a Second Property as a Non-Resident?
Building on that mechanism, the practical question for someone who sold one Australian property years ago and is now selling another is straightforward: does the old loss still count? Yes, provided both properties fall within the definition of taxable Australian property, which covers most Australian real estate regardless of where you live. The carried-forward loss is applied against the capital gain from cgt on second property sales before any discount calculation takes place, not after [aph.gov.au]. This ordering matters. You cannot calculate a discounted gain first and then subtract the loss; the loss reduces the gross gain, and only the remaining amount (if any) is assessed under whatever discount rules apply to your residency status. For most non-residents, that remaining discount is 0% on gains accrued since 8 May 2012, though a partial discount may still apply for any period during which you were previously an Australian tax resident.
Why Don’t Non-Residents Get the Same CGT Discount as Residents?
This is where many expats are caught out, often after already budgeting for a 50% reduction that no longer applies to them. Australian resident individuals and trusts are generally entitled to a 50% discount on capital gains from eligible assets held for at least 12 months. Non-residents lost access to that discount for gains accrued after 8 May 2012, meaning the discount rate on the post-2012 portion of a gain is effectively 0% [source: verified facts]. If you were a resident for part of the ownership period and a non-resident for the rest, the discount may be apportioned based on how long you actually held Australian residency during that period. This is a technical calculation, not a rough estimate, and it is one of the areas where ODIN Tax sees generalist accountants unfamiliar with non-resident CGT rules produce incorrect figures, because the default assumption in most tax software is built for resident taxpayers.
How Does Foreign Resident CGT Withholding Interact With a Carried-Forward Loss?
A related but distinct question is what happens at settlement, separate from what happens on your tax return. For contracts signed on or after 1 January 2025, the Foreign Resident Capital Gains Withholding threshold is $0, meaning FRCGW applies to all Australian property sales by non-residents regardless of value, unless a clearance certificate or variation notice is obtained beforehand [source: verified facts]. The purchaser is legally required to withhold 15% of the sale price and remit it directly to the ATO. This withholding is calculated on the gross sale price, not on your net gain, so it takes no account of a carried-forward capital loss sitting on your tax record. In practice, this means a non-resident with a substantial prior-year loss can still have 15% withheld at settlement, only to find much of it refunded after lodging a return that applies the loss and shows a smaller (or nil) actual tax liability. This is precisely why lodging the return promptly, rather than treating withholding as the final word, matters: the return is the mechanism that reconciles what was withheld against what is actually owed.
Can You Choose Which Capital Gain to Offset a Loss Against?
Stepping back from the settlement mechanics, a separate question is one of sequencing when you have gains and losses in the same income year. If you have multiple capital gains events in one tax year, the loss is applied against the gains in a way that is generally most beneficial to the taxpayer, typically against gains that would otherwise attract the least favourable discount treatment first. From 1 July 2027, proposed reforms would replace the current 50% CGT discount with cost base indexation and a 30% minimum tax rate on capital gains for individuals, trusts and partnerships, which would change how flexible this offsetting can be [aph.gov.au]. Until then, the current rules give non-residents reasonable latitude in how a carried-forward loss is matched against a gain, but this is not a decision to make casually, particularly if you hold a mix of Australian and foreign assets or have gains taxed under different treatment.
What Records Do You Need to Claim a Carried-Forward Loss?
None of this works without paperwork that proves the loss existed in the first place. The ATO expects documentation to support the loss: the original purchase contract, the sale contract from the loss-making transaction, settlement statements showing costs incurred, and evidence of how the loss was reported (or should have been reported) in the relevant prior-year tax return. If that earlier return was never lodged, or was lodged incorrectly, the carried-forward loss may not be recognised at all when you come to sell a second property. This is a common issue among expats who left Australia, sold a property years ago, and never filed the corresponding return, not realising that a documented loss could have been quietly working in their favour ever since. Backlog lodgement is more common than most people assume, and catching it up is usually the first step to recovering value that has been sitting on your tax record unused.
Frequently Asked Questions
Do carried-forward capital losses expire for non-residents?
Generally no. Under current ATO guidance there is generally no time limit on how long a net capital loss can be carried forward, for residents or non-residents, provided accurate records are kept.
Can I use a capital loss from an Australian property to reduce my overseas salary tax?
No. Capital losses can generally only offset capital gains and cannot reduce assessable income such as wages, rent or overseas earnings.
Do non-residents get any CGT discount at all?
Generally no discount applies to gains accrued after 8 May 2012, though a partial discount may apply for any period the individual was an Australian tax resident during the ownership period [source: verified facts].
Does FRCGW apply to every property sale by a non-resident now?
For contracts signed on or after 1 January 2025, yes. The withholding threshold is $0, so 15% withholding applies regardless of the property’s sale price, unless a clearance certificate or variation is obtained [source: verified facts].
If 15% was withheld at settlement, can I get some of it back?
Often yes, if your actual tax liability (after applying carried-forward losses and other deductions) is lower than the amount withheld. This is reconciled through lodging your tax return, not automatically.
What counts as taxable Australian property for this purpose?
Broadly, Australian real estate and certain related interests. Losses and gains on this category of asset can generally be offset against each other regardless of the taxpayer’s residency status.
Is this general information or specific advice for my situation?
This article is general information only and does not constitute personal tax advice. Your specific position depends on your residency history, prior lodgements and the nature of each property. ODIN Tax, a Registered Australian Tax Agent, can review your circumstances directly.
About ODIN Tax
ODIN Tax is a Registered Australian Tax Agent practice built exclusively for Australian expats and non-residents, part of ODIN alongside ODIN’s mortgage services. The team has prepared returns and capital gains calculations for 2,300+ Australian expats across 40+ countries, with particular depth in non-resident CGT, Foreign Resident CGT Withholding, and multi-year lodgement backlogs where carried-forward losses are often missed or miscalculated. Because ODIN Tax works alongside ODIN’s mortgage and conveyancing specialists, capital gains and loss planning on Australian property is handled as part of a coordinated view of your ownership history, not as an isolated calculation done in a vacuum. Every recommendation is grounded in current ATO legislation and published guidance, and figures are always tied to the relevant financial year given how frequently thresholds and rates change.
If you are planning to sell a second Australian property from overseas and want your prior-year losses applied correctly, get in touch with ODIN Tax at https://www.odintax.com/ to have your lodgement history and CGT position reviewed before settlement.
