Guide to capital gains tax 2018

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What's new

Foreign resident capital gains withholding payments

On 9 May 2017 the Government announced changes to the threshold and withholding rate for foreign resident capital gains withholding. The changes will apply to contracts entered into on or after 1 July 2017.

A 12.5% withholding obligation will apply to the disposal of:

• taxable Australian real property with a market value of $750,000 or more
• an indirect Australian real property interest
• an option or right to acquire such property or interest.

Where the vendor of these Australian assets is a foreign resident, the purchaser must pay 12.5% of the purchase price to the ATO as a foreign resident capital gains withholding payment.

A vendor can claim a credit for the foreign resident capital gains withholding payment the purchaser has made to the ATO by lodging a tax return for the relevant year.

The previous market value exemption threshold of $2 million for real property and 10% withholding rate will apply for any contracts that were entered into before 1 July 2017 (even if settlement is after that date).

See New legislation for more information about foreign resident capital gains withholding:

• obligations
• exclusions, and
• exceptions.

Transitional CGT relief (realisation event)

Transitional CGT relief was available in 2016-17 for superannuation funds and pooled superannuation trusts to defer the recognition of certain capital gains that might arise as a result of individuals complying with the new transfer balance cap and Transition-to-Retirement Income Stream (TRIS) reforms, for 2016-17.

A new label has been added to the CGT schedule to recognise the previously deferred capital gain in an income year in which a realisation event occurs. A superannuation fund or pooled superannuation trust must now use the CGT schedule where the entity has recognised a previously deferred capital gain. A new row has also been added to Table 1 of the CGT summary worksheet.

For more information regarding transitional CGT relief, see LCR 2016/8 Superannuation reform: transitional CGT relief for complying superannuation funds and pooled superannuation trusts .

Capital gains tax changes for foreign investors

On 9 May 2017 the Government announced that Australia's foreign resident capital gains tax (CGT) regime will be extended to deny foreign and temporary tax residents access to the CGT main residence exemption.

Following consultation, the Government amended the proposed change to the main residence exemption to ensure that only Australian residents for tax purposes can access the exemption. As a result, temporary tax residents who are Australian tax residents will be unaffected by the change.

• This change applies from the date of announcement.
• For properties you held prior to 9 May 2017, you have access to the main residence exemption until 30 June 2019. Legislation is being developed for this measure. For more information, see: Capital gains tax changes for foreign investors

ATO references:
NO NAT 4151