Please note the information below is general in nature. It should not be relied upon as tax advice. Before relying on any information posted on this site please contact us on 02 8264 0755 to discuss your personal situation.

CGT on foreign residents, temporary residents and changing residency


There are special capital gains tax (CGT) rules that apply if you are a foreign resident or if you become, or cease being, an Australian resident. Unless otherwise specified, ‘Australian resident’ means a resident of Australia for tax purposes. There are also special rules for temporary residents. These rules do not affect assets you acquired before 20 September 1985 (pre-CGT assets).

For periods when you are a foreign resident or temporary resident, only certain assets are subject to CGT. In addition, when you become an Australian resident, or stop being one, the range of assets on which you pay CGT in Australia changes.

Foreign residents
If you are a foreign resident, you are subject to CGT if a CGT event happens on or after 12 December 2006 to a CGT asset that is 'taxable Australian property’. There are specific rules where the CGT asset is a share or right acquired under an employee share scheme and you are, or have been, a temporary resident (for more information, see our fact sheet Foreign income exemption for temporary residents – employee share schemes).

If you are a foreign resident and the CGT event happened before 12 December 2006, CGT applies if the event happened to a CGT asset that had the necessary connection with Australia.

Taxable Australian property
Taxable Australian property includes:

- a direct interest in real property situated in Australia or a mining, quarrying or prospecting right to minerals, petroleum or quarry materials situated in Australia

- a CGT asset that you have used at any time in carrying on a business through a permanent establishment in Australia, and

- an indirect Australian real property interest – which is an interest in an entity, including a foreign entity, where you and your associates hold 10% or more of the entity and the value of your interest is principally attributable to Australian real property.

Taxable Australian property also includes an option or right over one of the above.

Certain CGT assets will also be taken to be taxable Australian property when leaving you cease being an Australian resident.

If you are a foreign resident, or the trustee of a trust that was not a resident trust for CGT purposes, and you acquired a post-CGT ‘indirect Australian real property interest’ before 11 May 2005 and that interest did not have the 'necessary connection with Australia' but is 'taxable Australian property', you are taken to have acquired it on 10 May 2005 for its market value on that day.

Necessary connection with Australia

Assets you may own that have the necessary connection with Australia include:

- land or a building in Australia (or an interest in land or a building)
a CGT asset you have used in carrying on a business through a permanent establishment in Australia
- a share in a private company that is an Australian resident company for the income year in which the CGT event happens
- a share, or an interest in a share, in a public company that is an Australian resident company and in which you and your associates have owned at least 10% of the value of the shares at any time during the five years before the CGT event happens
- a unit in a unit trust that is a resident trust and in which you and your associates have owned at least 10% of the issued units at any time during the five years before the CGT event happens
- an interest (other than a unit) in a trust that is a resident trust for CGT purposes for the income year in which the CGT event happens, and
- an option or right to acquire any of the CGT assets listed above.
Assets that do not fall within one of the above categories – for example, land or a building overseas or shares in a foreign company – do not have the necessary connection with Australia.

Temporary residents
For CGT events that happen on or after 1 July 2006, temporary residents are subject to the same CGT rules as foreign residents. However, there are specific rules where the CGT asset is a share or right acquired under an employee share scheme and you are, or have been, a temporary resident – see Foreign income exemption for temporary residents – employee share schemes.

This means that if you are a temporary resident, you will be subject to CGT on CGT events:

- that happen on or after 1 July 2006 and before 12 December 2006 to assets that have the necessary connection with Australia, and
- that happen on or after 12 December 2006 to taxable Australian property.

You are a temporary resident if you:

- hold a temporary visa granted under the Migration Act 1958
- are not an Australian resident within the meaning of the Social Security Act 1991, and
- do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991.

The Social Security Act 1991 defines an ‘Australian resident’ as a person who resides in Australia and is an Australian citizen, the holder of a permanent visa or a protected special category visa holder.


Anyone who is an Australian resident (for tax purposes) after 6 April 2006 but is not a temporary resident cannot later become a temporary resident - even if they later hold a temporary visa.



Ceasing to be a temporary resident

If you cease being a temporary resident:

- on or after 1 July 2006 and before 12 December 2006 and remain an Australian resident, you are taken to have acquired assets (other than assets you acquired before 20 September 1985) that do not have the necessary connection with Australia for their market value at the time you ceased being a temporary resident, and
- on or after 12 December 2006 and remain an Australian resident, you are taken to have acquired assets (other than assets you acquired before 20 September 1985) that are not taxable Australian property for their market value at the time you ceased being a temporary resident.

There is an exception to these rules for employee shares and rights.


Becoming an Australian resident
When you become an Australian resident (other than a temporary resident), you are taken to have acquired certain assets at the time you became a resident for their market value at that time.

If you became a resident before 12 December 2006, you are taken to have acquired assets that did not have the necessary connection with Australia at that time. This does not apply to assets you acquired before 20 September 1985 (pre-CGT assets) and assets that had the necessary connection with Australia.

If you became a resident on or after 12 December 2006, you are taken to have acquired assets that were not taxable Australian property at that time. This does not apply to assets you acquired before 20 September 1985 (pre-CGT assets) and assets that were taxable Australian property.

If you became a resident before 12 December 2006, the general cost base rules apply to any CGT assets that have the necessary connection with Australia. If you became a resident on or after 12 December 2006, the general cost base rules apply to any CGT assets that are taxable Australian property.


Please note the information contained on this website is general in nature and should not be relied upon as tax advice. If you have a question please contact Sean Urquhart on 02 8264 0755.