Taxable Australian Property for Expats

Home / Individuals / Capital Gains Tax / Selling Australian Property / Australian Non Resident

Who we help

  • Australians living in the UK or elsewhere who own Australian real estate or interests in property-rich entities
  • UK nationals and other foreign residents buying or selling Australian property
  • Individuals moving countries with shares, options and carried interests
  • Trustees and beneficiaries of property-rich trusts with cross-border footprints
  • Non-residents with Australian property interests

Advice is tailored to your specific circumstances, such as changes in residency status or complex asset structures.

Selling or restructuring assets from overseas can trigger Australian capital gains tax. Both tax residents and non-residents may be affected by CGT, but the rules differ: tax residents are generally subject to CGT on worldwide assets, while non-residents are usually only taxed on taxable Australian property.

It is important for expats and foreign owners to understand the rules around taxable Australian property as this can have tax implications. Seeking professional advice is key to ensure compliance and avoid unexpected tax liabilities.

Knowing what is in scope and how the 2025 FRCGW changes apply at settlement and how residency shifts affect timing can save you real money. We advise expats and globally mobile owners on Australian and UK tax matters every day.

You may be liable for CGT on taxable Australian property depending on your residency status as a tax resident and/or non-resident.

What is “taxable Australian property”

Foreign and temporary residents are generally taxed in Australia only on taxable Australian property (TAP). A foreign resident is subject to capital gains tax (CGT) only on Taxable Australian Property.

Assets are classified as taxable Australian property (TAP) based on specific criteria set out in the tax legislation. This includes:

  • Australian real property such as houses, apartments, commercial buildings and land
  • Leases over Australian land, which are also included as taxable Australian property
  • Indirect Australian real property interests, for example shares or units where the entity’s value is principally attributable to Australian real property
  • Mining, quarrying or prospecting rights in Australia
  • Assets used in carrying on a business through a permanent establishment in Australia
  • Options or rights to acquire any of the above, including off-the-plan contracts

The five categories of TAP include Taxable Australian Real Property, indirect real property interests, assets used in carrying on a business, permanent establishments, and certain elections under section 104-165 of the ITAA 1997.

Some assets are automatically caught as TAP assets under the relevant section of the ITAA 1997 and are therefore subject to Australian tax rules regardless of residency status. The location of assets, such as being in Australia, is a key factor in their classification as taxable Australian property.

The ATO confirms this scope and provides worked examples for foreign residents.

For indirect interests, the legislation applies a principal asset test. Indirect interests can arise through a company or trust and the interests of associates and shareholders are considered in the principal asset test.

In short, the principal asset test works by examining the relation between the entity’s value and Australian real property: if more than half of an entity’s underlying value is classified as Australian real property, a foreign resident’s disposal can be taxable in Australia even if you sell shares rather than the property itself.

This can catch cross-border mergers, management rollovers and trust restructures and applies to things such as indirect interests held through interposed entities.

What is not taxable Australian property

Shares or units that don’t meet the property-rich tests, foreign securities and other offshore assets are generally outside the Australian CGT net for foreign residents. Non-Taxable Australian Property doesn’t incur CGT when disposed of by foreign residents.

The key difference between taxable Australian property (TAP) and non-TAP assets is that TAP includes assets such as direct interests in Australian real property while non-TAP assets, like most foreign securities, are generally excluded from the CGT net for foreign residents. However, proposed Treasury changes are consulting on a tighter regime for foreign residents disposing of Australian-connected assets.

Note: There may be important exceptions or upcoming changes to these rules, so stay up to date and seek professional advice. If you are planning a transaction, get advice early.

Australian residential landscape

What is not taxable Australian property

Shares or units that don’t meet the property-rich tests, foreign securities and other offshore assets are generally outside the Australian CGT net for foreign residents. Non-Taxable Australian Property doesn’t incur CGT when disposed of by foreign residents.

The key difference between taxable Australian property (TAP) and non-TAP assets is that TAP includes assets such as direct interests in Australian real property while non-TAP assets, like most foreign securities, are generally excluded from the CGT net for foreign residents. However, proposed Treasury changes are consulting on a tighter regime for foreign residents disposing of Australian-connected assets.

Note: There may be important exceptions or upcoming changes to these rules, so stay up to date and seek professional advice. If you are planning a transaction, get advice early.

2025 FRCGW changes at settlement

If the vendor is a foreign resident for Australian tax purposes, the purchaser must withhold part of the price and pay it to the ATO under the Foreign Resident Capital Gains Withholding rules. The FRCGW regime is designed to improve tax recovery from non-residents and prevent tax avoidance.

The withholding is triggered by a CGT event involving Taxable Australian Property (TARP) assets. A foreign resident makes a capital gain on the disposal of TARP assets and the ATO has stated the purpose and scope of these changes to clarify tax obligations for expats.

From 1 January 2025 contracts signed on or after:

  • rate increases to 15%
  • $750,000 threshold removed, so applies to all contracts

If you are an Australian resident vendor, give the purchaser an ATO clearance certificate before settlement. If you are a foreign resident and the default 15% is more than the expected tax, you can apply for a variation once the contract is signed. Timing matters because variations can take weeks, so build this into your settlement plan.

How we help with FRCGW

  • Residency review so you know if a clearance certificate is available
  • Drafting and lodging variation applications with supporting calculations
  • Purchaser guidance, payment mechanics and settlement statement checks
  • UK angle: ensuring withheld Australian amounts are credited in your UK return where relevant

Main residence exemption for foreign residents

If you are a foreign resident when you sell your Australian former home, you generally can’t claim the main residence exemption unless a narrow life events test is met. This rule applies to disposals after 30 June 2020, so the relevant period and years are before and after this date.

The exemption is intended to align the treatment of capital gains for foreign residents with that of direct owners, clarifying the policy intent behind these provisions. Only certain capital gains are included in the exemption, while gains arising outside the qualifying period are not included.

To understand the complexities, you need to know how the rules differentiate between assets and the classification of taxable property for expats. Expats who left Australia and later sell should model the cash impact before exchange. ATO updated its guidance in 2025 and has examples.

Note: There are important exceptions and recent changes to these rules, so check the latest ATO guidance before making decisions.

Changing residency and “deemed disposal”

When you stop being an Australian resident, a CGT event is triggered and you are taken to have disposed of your CGT assets at market value at that time, except for taxable Australian property.

This is called deemed disposal. When a foreign resident stops being an Australian resident for tax purposes, they are deemed to have disposed of their non-taxable Australian property assets at market value (such as shares and overseas property). The relevant period or years for the deemed disposal is the time up to the date you cease residency, which affects how gains are calculated.

A taxpayer makes a capital gain or loss at the time the CGT event is triggered, unless an election is made to defer it. You may choose to disregard the gain or loss, but assets for which you choose deferral are treated as taxable Australian property going forward.

Capital gains tax is deferred if a foreign resident elects to not treat their assets as disposed of when they cease to be a resident. The choice has long-term implications for future exits, estate planning and UK interaction, so we run scenario modelling before you depart or return.

Note: There are important exceptions and planning points, such as the treatment of assets acquired during different years or periods of residency.

Australia – UK tax interaction in practice

The treaty allocates primary taxing rights and allows credits to avoid double taxation. For UK tax residents disposing of Australian real property, Australia typically taxes first, we map the order of returns and documentation to secure relief efficiently.

The relationship between the Australian and UK tax systems is key to how capital gains are taxed and how exemptions or credits apply to property disposals. The relevant years or period during which assets are held and disposed of can impact eligibility for double taxation relief, so it’s important to consider the timing of events across both jurisdictions.

Both countries tax use the  contract date for CGT purposes in most cases, albeit the UK CGT return is due within 60 days of settlement of the sale.

Cross-border transactions, especially those involving foreign currency, require careful conversion and timing analysis to ensure CGT is calculated correctly in both countries.

If you move back to Australia and dispose of UK property or shares, the Australian resident rules can re-engage. We align cost bases and acquisition dates to avoid surprises.

The way cost bases are aligned between Australia and the UK ensures that gains are not taxed twice on the same amount, providing a methodical approach to minimise double taxation.

What’s next

The Government has recently released new rules under consultation that will change the foreign resident CGT regime. It has been stated that these changes may capture more assets as Taxable Australian Property, particularly through updated notification rules and a focus on Australian land-connected assets.

The implementation period will be over several years, with the first changes likely to start in 2025 and more to come. Not all proposals are enacted but deal teams should expect closer scrutiny of indirect disposals and property-rich structures in 2025 and beyond.

We track the exposure drafts and consultation outcomes and will advise if your transaction is affected.

Common expat scenarios we work on

  • Selling an Australian apartment while living in London, with FRCGW variation and UK credit relief
  • Re-structuring a trust that holds Australian commercial property, testing the principal asset and non-portfolio interest rules before a unit sale
  • Returning to Australia and selling a UK share portfolio, aligning UK and Australian acquisition dates and discount eligibility, and considering the period or years the asset was held to determine eligibility for the CGT discount
  • Leaving Australia for a secondment and modelling the deemed disposal choice across a mixed asset base, highlighting the difference between TAP and non-TAP assets and how this impacts tax obligations
  • Managing Australian investments as an expat, including ETFs, and declaring deemed disposals on ETFs to take advantage of non-TAP asset classification for tax efficiency during the period of non-residency

FAQ

Australian real property, indirect interests where the entity’s value is mainly Australian real property, certain mining and resource rights, assets used through a permanent establishment in Australia, and options or rights to acquire any of these.

For contracts signed on or after 1 January 2025, the withholding rate is 15% and there is no $750,000 threshold. Purchasers must withhold if the vendor is a foreign resident for tax purposes, unless a valid variation applies.

Yes. Provide an ATO clearance certificate to the purchaser before settlement. Without it, the purchaser must withhold.

Generally no, unless you meet the life events test, which is very narrow. Plan before you sign.

You are deemed to dispose of assets that are not Taxable Australian Property at market value, unless you choose to defer. Australian real property is carved out. Model both options before you leave.

london cityscape

Book a consultation

Contact Us
Contact Us