What Is Foreign Resident CGT?
Tax residency (not citizenship) determines CGT obligations. A foreign resident for Australian tax purposes is generally subject to CGT on taxable Australian property (TAP) but not on most other assets.
Living overseas does not automatically make you a foreign resident — the ATO applies statutory residency tests.
CGT for Foreign Residents
| Asset | Australian CGT? |
|---|---|
| Australian real property | Yes — TAP |
| Indirect interest in Australian land-rich entities | Yes — TAP |
| Business assets through Australian permanent establishment | May be TAP |
| Ordinary Australian listed shares | Generally no (unless TAP) |
| Assets held when residency changes | Deemed disposal rules may apply |
CGT Discount for Foreign Residents
Australian tax residents can generally reduce a capital gain by 50% if they hold the asset for at least 12 months. Foreign residents face restrictions introduced from 8 May 2012:
- Assets acquired on or after 8 May 2012: Foreign residents generally cannot claim the 50% CGT discount.
- Assets acquired before 8 May 2012: Transitional rules may allow a discount on the portion of the gain accrued while you were an Australian resident.
Do not assume all foreign residents never receive any discount — check transitional rules for pre-2012 assets.
| Scenario | CGT Discount |
|---|---|
| Foreign resident, asset acquired after 8 May 2012 | Generally no 50% discount |
| Foreign resident, asset acquired before 8 May 2012 | Transitional rules may apply |
| Australian resident selling TAP | May qualify for 50% discount if held 12+ months |
Foreign Resident Capital Gains Withholding (FRCGW)
Purchasers of Australian property must withhold and pay to the ATO unless the vendor provides a valid clearance certificate (Australian residents) or variation notice (foreign residents).
| Contract signed | FRCGW rate |
|---|---|
| On or after 1 January 2025 | 15% of full sale price (all property) |
| 1 July 2017 – 31 December 2024 | 12.5% if property ≥ $750,000 |
FRCGW vs CGT
| Feature | CGT | FRCGW |
|---|---|---|
| What is it? | Tax on capital gain | Withholding at settlement |
| Who bears it? | Vendor (seller) | Withheld from vendor's proceeds |
| Final amount | Determined in tax return | Credited against CGT liability |
Clearance Certificates
Australian tax residents selling property should apply for a clearance certificate before settlement. Without one, the purchaser must withhold 15% even if the vendor is Australian.
Foreign residents do not use the Australian resident clearance certificate form. They may apply for a variation notice to reduce withholding if eligible.
Clearance certificates are valid for 12 months from issue.
How to Calculate Foreign Resident CGT
Capital gain = sale proceeds − cost base (simplified). Then apply capital losses, CGT discount eligibility, and include in your Australian tax return. FRCGW withheld is credited against your final tax.
Worked Example
A foreign resident sells an Australian investment property for $800,000 (contract signed March 2025). Cost base $500,000. Capital gain $300,000. No CGT discount (asset acquired after 2012). Purchaser withholds 15% = $120,000 at settlement. Vendor lodges Australian tax return; FRCGW credited against actual CGT liability.
Main Residence & Foreign Residents
Foreign residents face restrictions on the main residence exemption. If you were a foreign resident at the time of sale, the full main residence exemption may not be available. Check current ATO rules for your circumstances.
Common Mistakes
- Confusing citizenship with tax residency
- Assuming foreign residents never get any CGT discount
- Assuming foreign residents always get the 50% discount
- Confusing FRCGW with final CGT liability
- Foreign resident applying for Australian resident clearance certificate
Related: FHSS scheme · QLD transfer duty · PAYG withholding variation
Frequently Asked Questions
Do foreign residents pay CGT in Australia?
Foreign residents are generally subject to Australian CGT on taxable Australian property (TAP), including Australian real property and certain indirect interests. Other assets may not be subject to Australian CGT.
Can foreign residents claim the 50% CGT discount?
Foreign residents generally cannot claim the full 50% CGT discount on assets acquired on or after 8 May 2012. Transitional rules may apply to assets acquired before that date, allowing a discount on the portion of the gain accrued while an Australian resident.
What is foreign resident capital gains withholding?
FRCGW requires purchasers to withhold 15% of the sale price (for contracts from 1 January 2025) and pay it to the ATO when the vendor does not provide a valid clearance certificate or variation notice.
What is the current foreign resident CGT withholding rate?
For property contracts signed on or after 1 January 2025, the FRCGW rate is 15% of the full sale price. From 1 July 2017 to 31 December 2024, 12.5% applied to property valued at $750,000 or more.
What is a CGT withholding clearance certificate?
Australian tax residents selling property apply for a clearance certificate so the purchaser does not withhold FRCGW. Certificates are valid for 12 months. Foreign residents use a variation notice instead — not the Australian resident clearance certificate.
Can a foreign resident get a clearance certificate?
No. Clearance certificates are for Australian tax residents. Foreign resident vendors may apply for a variation notice to reduce the withholding rate if eligible.
What happens if I become a foreign resident while owning Australian property?
Changing tax residency can trigger CGT consequences. Australian property generally remains taxable Australian property. Assets that are not TAP may be subject to deemed disposal rules when you become a foreign resident.
Do foreign residents pay CGT on Australian shares?
Generally only if the shares are taxable Australian property — for example, if they are an indirect interest in Australian real property. Most ordinary Australian listed shares held by foreign residents are not TAP.
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Written by AussieSalary Experts
Editorial Team
Compiled by industry experts with the best knowledge in Australian taxation, superannuation, and public sector compensation.
Read our Editorial Policy →✓ Fact-Checked & Verified
This guide is verified directly against primary Australian legislative sources, including the Australian Taxation Office (ATO) rates, Fair Work Ombudsman awards, and federal agency EAs.
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