On 14 May 2024, as part of the 2024–25 Budget, the Government announced it will strengthen the integrity of the foreign resident capital gains tax (CGT) regime to ensure foreign residents pay their fair share of tax in Australia and to provide greater certainty about the operation of the rules. This measure is not yet law.
The amendments will apply to CGT events starting on or after 1 July 2025. The amendments will:
- clarify and broaden the types of assets that foreign residents are subject to CGT on
- amend the point-in-time principal asset test to a 365-day testing period
- require foreign residents disposing of shares and other membership interests exceeding $20 million in value to notify the ATO, prior to the transaction being executed.
This measure will ensure that Australia can tax foreign residents on direct and indirect sales of assets with a close economic connection to Australian land, more in line with the tax treatment that already applies to Australian residents. The new ATO notification process will improve oversight and compliance with the foreign resident CGT withholding rules, where a vendor self-assesses their sale is not taxable real property.
These reforms will also improve certainty for foreign investors by aligning Australia’s tax law for foreign resident capital gains more closely with OECD standards and international best practice.
The Government will consult on the implementation details of the measure.
More information