CGT Discount Rules for Foreign and Temporary Residents

The general 50% CGT discount for eligible individuals and trusts is restricted for foreign residents and temporary residents in relation to capital gains accruing after 8 May 2012.

The restriction does not always mean that the entire discount is lost. For assets held across resident and foreign-resident periods, the calculation can preserve an eligible portion, depending on the statutory method and evidence.

Threshold eligibility still applies

The asset must first satisfy the ordinary discount conditions, including a holding period of at least 12 months and the relevant taxpayer type. Companies do not receive the general CGT discount.

Capital losses are applied before the discount calculation.

8 May 2012 transitional point

For assets held at 8 May 2012, a market valuation at that date may be relevant to the statutory methods. Reliable historical valuations can be difficult to obtain many years later, particularly for real property and private interests.

The law provides methods that can depend on residency days and values. The most favourable defensible method should be identified from the facts; it should not be selected without the required evidence.

Later residency changes

Periods of Australian residency, foreign residency and temporary residency can affect the eligible fraction. Exact dates and status changes matter. A person may move between temporary-resident and ordinary-resident status without leaving Australia.

CGT event I1 and the choice to disregard it can also alter when the gain is recognised and how much discount remains available.

Property sales and withholding

Foreign resident capital gains withholding is calculated separately on gross proceeds. It does not represent the discounted capital gain. The final return applies losses, cost base and discount rules before claiming the withholding credit.

Valuation and documentation

Retain purchase and sale documents, residency chronology, 8 May 2012 valuation where relevant, improvement records and capital works adjustments. A calculation without the underlying dates and values is not auditable.

Practical takeaway

Model the discount at the same time as residency and departure CGT. Do not apply a blanket 50% rate to a gain merely because the asset was held for more than 12 months.

Official sources and further reading

• Australian Taxation Office: CGT discount for foreign residents
• Australian Taxation Office: How changing residency affects CGT
• Australian Taxation Office: Foreign resident capital gains withholding overview
• Australian Taxation Office: Cost base of assets

CGT