Expanding CGT Regime for Foreign Residents

The foreign resident capital gains tax (CGT) regime will be expanded by:

  • Clarifying and expanding the types of assets on which foreign residents are liable to CGT
  • Changing the point-in-time principal asset test to a 365-day testing time
  • Requiring foreign residents to dispose of shares and other membership interests surpassing $20 million in value to inform the ATO before the transaction is executed.

Under current law, foreign residents are liable to CGT when they dispose of an asset that is categorised as ‘taxable Australian property’ (TAP). The rules seek to ensure that non-residents are liable to Australian CGT when they sell assets that have sufficient Australian land and assets that have been utilised in business activities in Australia.

Shares in an organisation and units in a trust can be categorised as TAP if the taxpayer or associated parties hold at least a 10% interest in the entity and where over 50% of the gross market value of the assets held by the entity is attributable to real property situated in Australia.

The measures ensure that foreign residents can be taxed by Australia on direct and indirect disposal of assets with a close economic connection to Australian land. The government will have a discussion on the implementation details of the measure which is predicted to increase receipts by $600 million and maximise payments by $8 million over 5 years from 2023-24.

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