Capital Gains Tax for Australian Expats: Rules, Rates, and Exemptions

Whether you hold shares, property, or business assets, the CGT rules differ significantly based on your residency status under Australian tax law. Repatriating to Australia can also trigger CGT events, potentially resulting in unexpected liabilities.

This guide explores capital gains tax for Australian expats, including how tax residency is determined, the rates that apply in 2025, the key exemptions available, and practical strategies to reduce your CGT burden while living abroad or returning home as an Australian expat.

How Does Capital Gains Tax Work for Expats?

Capital gains tax (CGT) is a tax levied on the profit derived from the disposal of investment assets. When you sell real estate, stocks, or other qualifying assets for an amount exceeding the original purchase price, the resulting price difference is considered a capital gain and is subject to taxation.

CGT applies to assets like:

• Stocks, ETFs, cryptocurrencies
• Real estate
• Business assets
• Collectables like antiques and art
• Intellectual property

While it applies to capital gains specifically, CGT is not a separate tax but a component of income tax. Capital gains are added to the annual income you declare on your tax returns and are subject to taxation at your individual income tax rates.

The applicable CGT rules and rates depend on whether you are a:

1. Resident for tax purposes in Australia
2. Non-resident (foreign resident) for tax purposes in Australia

Australian Expats Who Are Tax Residents

Your tax residency status doesn’t always correspond to your citizenship. It’s determined by specific criteria outlined by the Australian Tax Office (ATO), including:

• Your physical presence in Australia
• The purpose of residency
• Personal ties
• Economic ties
• Location and management of assets

To determine your tax residency, the ATO uses the following statutory tests:

1. Resides test: The primary residency test; determines your residency based on factors mentioned above.
2. Domicile test: Considers whether your domicile (permanent home) is in Australia.
3. 183-day test: Qualifies you for residency if you’ve spent over 183 days in a tax year in Australia.
4. The Commonwealth superannuation test: Applies to Australian Government employees stationed overseas and their spouses and dependent children.

Individuals who qualify as Australian tax residents are subject to taxation on both their Australian and foreign-sourced income, including capital gains, regardless of their current country of residence.

Australian Expats Who Are Considered Non-Residents

If you don’t meet the tax residency criteria, you will be considered a non-resident for tax purposes in Australia—even if you still hold Australian citizenship. However, you may still be required to file a tax return or submit a non-lodgment advice form to notify ATO that you are not obligated to lodge a tax return.

Non-residents are generally taxed only on their Australian income and are subject to CGT if the capital gain was derived from taxable Australian property, such as real estate.

What Happens When Your Residency Status Changes?

In certain situations, a change in your residency status may trigger a CGT event, resulting in an immediate tax liability.

Worldwide assets you own at the time you become a tax resident are considered to be acquired on the day your residency starts, at their market value. This deemed acquisition does not result in immediate taxation of the said assets; it establishes their base value, ensuring that only the gains realised after that point are subject to Australian taxation.

Assets gained before 20 September 1985 are excluded from the deemed acquisition rule—and so is taxable Australian property (assets already subject to CGT while you were a non-resident).

If you cease being a resident, you’re deemed to have disposed of your taxable assets (except taxable Australian property) at their market value on the day you lose your residency status. As a result, you may be liable for capital gains tax on those assets in Australia. This deemed disposal means you will be taxed as if a profit had been made, even though no actual sale or profit was realised.

The deemed disposal of assets is treated as if it occurred after you became a non-resident, so you may not be eligible for full CGT discounts. You may, however, qualify for a partial discount because you were a resident for a part of the period you held those assets.

Capital Gains Tax Rates

Capital gains tax for Australian expats is levied at the same rate as personal income tax. For tax residents, it’s calculated based on their marginal tax rate. The table below outlines the marginal tax rates for Australian residents in 2025:

Medicare Levy: Australian tax residents are also required to pay a 2% Medicare levy in addition to the above rates. A Medicare Levy Surcharge of 1–1.5% may also apply to higher-income earners without private hospital cover.

Non-residents are taxed at significantly higher rates than residents, and they are not eligible for the tax-free threshold. The income tax rates for non-residents in 2025 are as follows:

Foreign Resident Capital Gains Withholding

For real estate sales over AUD $750,000, the buyer must withhold 12.5% of the purchase price and remit it to the Australian Taxation Office (ATO) on behalf of the seller.

This withholding is not an additional tax – it is credited against your capital gains tax due. If the withheld amount exceeds your CGT liability, the excess can be refunded after you lodge your Australian tax return.

Exemptions From the CGT for Expats

The Australian tax system offers numerous opportunities to reduce your taxable income. However, many CGT exemptions are only available to tax residents.

Depending on your residency status and the asset in question, you can benefit from the following tax offsets:

1. Main residence exemptions (MRE)
2. Discounts based on asset hold period
3. Assets exempted from CGT

Main Residence Exemption (MRE)

You aren’t liable for CGT when you sell your main residence—your primary home—under the following conditions:

1. You have owned the property for at least 12 months and have lived in it for the entire duration of ownership.
2. You didn’t use the property to earn income (through renting, operating a business, or property flipping)
3. The property is located on land under two hectares

You may qualify for a partial exemption if you only satisfy some of the three conditions.

If you don’t satisfy the criteria for MRE, you might still be able to avoid the CGT due to the 6-year main residence exemption. This rule allows you to treat your former primary home as the main residence for up to six years after moving out (if you start using it to produce income) or indefinitely (if you don’t use it for profit).

You can only claim main residence status for one property at a time. The MRE is only available to tax residents, meaning you’ll be taxed on the full capital gain if you’re considered a non-resident.

Discounts Based on Asset Hold Period

Non-residents are not eligible for the 50% CGT discount on gains made after 8 May 2012, unless they were residents for part of the ownership period. Partial discounts may still apply in some cases.

Assets Exempted From CGT

Some types of assets are exempted from CGT regardless of your tax residency status, such as:

• Assets acquired before 20 September 1985.
• Personal-use assets: These are CGT-exempt if acquired for under AUD $10,000, such as household goods, artwork, and jewellery.
• Vehicles: Cars and motorcycles are always CGT-exempt, regardless of their value.
• Certain awards and payments, including gambling winnings, competition prizes, compensation for personal injury, and official decorations for bravery.

Strategies for Reducing Australian Expat Capital Gain Tax

You may reduce your tax liability with strategic financial planning. Options for reducing CGT include:

• Planning in advance: If you’re returning to Australia, consider if selling your assets could be more beneficial prior to changing your residency status.
• Maximise tax deductions: Check your eligibility for tax exemptions or discounts and the actions you must take to meet the requirements.
• Small business CGT concessions: Certain exemptions available to small business owners can make a significant difference when growing your business, including the 15-year exemption, active asset discount, and retirement exemption.
• Timing CGT events: If you expect your circumstances to change in a manner that would allow you to reduce your CGT liability, you can defer the sale of your assets to the following tax year.
• Taking advantage of double taxation agreements (DTA): Australia has DTAs with the UK and over 40 other countries, which allows you to avoid having your assets taxed in two jurisdictions.
• Offsetting capital gains with capital losses: Capital losses can reduce the taxable gains in the same financial year. You can also carry them to the following years if you expect more significant gains in the future.
• Adjusting cost base: Since the taxable capital gain is the difference between the selling price and the cost base (acquiring price), increasing the cost base by including all related costs can reduce the taxable gain.