The Government is taking action to enhance the foreign resident capital gains tax (CGT) regime. Announced on 14 May 2024 as part of the 2024–25 Budget, these measures aim to ensure foreign residents pay their fair share of tax in Australia and provide clearer rules for everyone involved.
Key Changes Coming on 1 July 2025
The new amendments will take effect from 1 July 2025, impacting CGT events from that date onward. Here’s what’s changing:
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Broader Asset Coverage: We’re expanding the range of assets that foreign residents are subject to CGT on. This means a wider variety of investments will be included under the tax umbrella.
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Principal Asset Test Adjustment: The principal asset test will now cover a 365-day period, providing a more comprehensive evaluation timeframe.
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Pre-Transaction Notification: Foreign residents selling shares and other membership interests worth over $20 million must notify the ATO before the transaction is executed. This step ensures better oversight and compliance.
Why These Changes Matter
These updates will help Australia tax foreign residents on both direct and indirect sales of assets closely tied to Australian land. The new rules bring us in line with how Australian residents are taxed and align our laws with OECD standards and international best practices.
The new ATO notification process will enhance oversight, ensuring foreign residents comply with CGT withholding rules. By making these changes, we’re aiming for a fairer and more transparent tax system.
Next Steps
The Government will consult on the details of implementing these measures to ensure smooth and effective application. Stay tuned for more updates and detailed guidance on how these changes will be rolled out.
With these reforms, we're committed to maintaining a fair and robust tax system that benefits everyone involved.
Source from ATO website: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/strengthening-the-foreign-resident-cgt-regime
