What Australia’s Foreign Resident CGT Changes Mean for Australians Living Overseas.
Australians living overseas can easily assume that becoming a foreign resident for tax purposes means Australian capital gains tax is no longer relevant.
That can be a costly assumption.
On 10 September 2026, legislation strengthening Australia’s foreign resident capital gains tax (CGT) regime passed Parliament. The reforms are intended to strengthen Australia’s ability to tax foreign residents on assets with a close economic connection to Australian land and natural resources and provide greater certainty about how the rules apply.
For Australians who have moved overseas, foreign investors and people holding Australian property or significant Australian investments while living abroad, the changes provide another reason to carefully review their Australian tax position.
What Is Foreign Resident Capital Gains Tax?
Australia’s CGT rules can continue to apply to a foreign resident where a CGT event involves certain Australian assets.
Historically, Australia’s foreign resident CGT regime has focused on taxable Australian property, including Australian real property, certain indirect interests in Australian real property and assets connected with an Australian permanent establishment.
The rules are contained principally in Division 855 of the Income Tax Assessment Act 1997.
You can read the Australian Government legislation covering capital gains and foreign residents on the Federal Register of Legislation.
Becoming a foreign resident for Australian tax purposes therefore does not necessarily mean that Australian CGT disappears.
What Has Changed for Foreign Residents?
The recently passed reforms strengthen Australia’s foreign resident CGT regime, particularly in relation to assets with a close economic connection to Australian land.
The reforms were originally announced in the 2024–25 Federal Budget and were subsequently developed through consultation.
The Government has described the changes as bringing Australia’s rules more closely into line with OECD principles and strengthening Australia’s ability to tax foreign residents on Australian real property and assets closely connected with Australian land.
The reforms are particularly relevant where foreign residents hold significant Australian assets or indirect interests involving Australian land.
You can read the Government’s announcement confirming the passage of the foreign resident CGT reforms through Parliament.
Why Does This Matter to Australians Living Overseas?
Moving overseas and becoming a foreign resident for tax purposes can substantially change how Australia’s taxation laws apply to you, but it does not necessarily remove you from the Australian taxation system.
Australians living overseas may still have Australian taxation issues involving:
- Australian residential or commercial property
- Australian land
- Certain indirect interests in Australian real property
- Australian businesses
- Companies and trusts
- Capital gains
- Australian-sourced income
- Assets connected with an Australian permanent establishment
- Investments with significant exposure to Australian real property
Whether Australian CGT applies depends upon the nature of the asset, your residency status and your particular circumstances.
For more information about residency itself, see Tax Residency Lawyer Australia.
Living in Dubai? Australian Tax May Still Matter
Dubai deserves particular attention because Australians relocating to the UAE may assume that Dubai’s personal tax environment means they no longer have Australian taxation obligations.
That is not necessarily the case.
Moving to Dubai does not itself determine whether you cease being an Australian resident for tax purposes. Even where you become a foreign resident, Australian tax can continue to apply to certain Australian income, property and assets.
Issues may arise involving Australian property, capital gains, companies, trusts, investments, business interests and Australian-sourced income.
Chris Garlick has prepared a dedicated guide for Australians living or planning to live in the UAE: Australian Tax for Australians Living in Dubai.
This is particularly important where substantial Australian assets are retained after relocation.
Foreign Resident Capital Gains Withholding
Foreign resident capital gains withholding is another issue that property owners should understand.
Since 1 January 2025, the foreign resident capital gains withholding rate has been 15%, and the previous property-value threshold was removed.
The withholding regime can therefore apply to property transactions regardless of value.
Australian resident vendors disposing of relevant Australian real property generally need an ATO clearance certificate to prevent withholding from the sale proceeds. Foreign resident vendors may, in appropriate circumstances, apply for a variation.
The Australian Taxation Office provides information about foreign resident capital gains withholding.
Importantly, withholding is not necessarily the same thing as the vendor’s final CGT liability. It is a collection mechanism associated with the transaction.
Are You Still an Australian Tax Resident?
Before considering the foreign resident CGT rules, an even more fundamental question may need to be answered:
Are you actually a foreign resident for Australian tax purposes?
Citizenship, immigration status and simply living outside Australia do not, by themselves, determine Australian tax residency.
Your circumstances may require consideration of matters such as:
- Your home and living arrangements
- Family connections
- Employment
- Business interests
- Australian property
- Financial connections
- Overseas accommodation
- Frequency and purpose of travel to Australia
- The nature and duration of your overseas relocation
An incorrect assumption about residency can affect not only CGT but potentially foreign income, Australian income, investments and reporting obligations.
See Tax Residency Lawyer Australia for further information.
Australian Property Can Create Continuing Tax Obligations
Australians relocating overseas frequently retain their Australian home or investment properties.
This can create continuing Australian taxation issues.
Depending on the circumstances, these may include:
- Australian rental income
- Capital gains tax
- Foreign resident capital gains withholding
- Main residence exemption issues
- Property held through companies or trusts
- Indirect Australian real property interests
The tax consequences should ideally be considered before a property is sold rather than after contracts have been signed.
For specialist advice concerning capital gains tax disputes and complex CGT matters, see Capital Gains Tax Lawyer.
Companies, Trusts and International Structures
Foreign resident CGT issues are not limited to an individual directly owning a house or parcel of land.
Complexity can arise where Australian assets are held through:
- Companies
- Trusts
- Partnerships
- Investment structures
- Foreign entities
- Cross-border business structures
Indirect interests in Australian real property can fall within Australia’s foreign resident CGT regime.
Determining whether an interest is caught by the Australian rules can require detailed consideration of the underlying assets and ownership structure.
For broader cross-border taxation matters, see International Tax Lawyer Australia.
ATO Reviews and Foreign Resident CGT Disputes
Foreign residency and CGT matters can also become the subject of Australian Taxation Office review or dispute.
Issues may include:
- Whether an individual actually became a foreign resident
- The date Australian residency ceased
- Whether an asset is taxable Australian property
- Valuation issues
- Indirect Australian real property interests
- Capital gains calculations
- Withholding obligations
- Amended assessments
- Penalties and interest
Where the ATO has commenced a review or issued an assessment, obtaining advice early can assist in identifying the legal and factual issues before responding.
For disputes with the Commissioner, see ATO Tax Disputes Lawyer.
Planning to Move Overseas?
Tax planning should ideally occur before leaving Australia.
Depending on your circumstances, matters worth reviewing can include:
- Your Australian tax residency
- Australian property
- Shares and investments
- Companies and trusts
- Capital gains tax consequences of ceasing residency
- Overseas employment
- Foreign income
- Australian-sourced income
- Business interests
- Future disposal of Australian assets
A decision that appears relatively simple before departure can have taxation consequences years later.
Already Living Overseas?
If you have already moved overseas, it is still possible to review your Australian taxation position.
This may be particularly important if you:
- Own Australian property
- Have significant Australian investments
- Operate an Australian business
- Control Australian companies or trusts
- Regularly return to Australia
- Are uncertain about your tax residency
- Intend to sell Australian assets
- Have received correspondence from the ATO
The appropriate tax treatment depends upon your individual circumstances and the assets involved.
Speak With Chris Garlick
Australia’s foreign resident CGT regime is becoming increasingly important for Australians living overseas, foreign investors and taxpayers with cross-border assets.
Chris Garlick provides specialist advice and representation in Australian and international taxation matters, including tax residency, capital gains tax, foreign resident taxation, Australian property, international structures, ATO reviews, objections and taxation disputes.
If you are living overseas, planning to leave Australia, selling Australian assets or uncertain about the effect of the foreign resident CGT rules, obtaining advice before completing a transaction may help identify potential taxation consequences and protect your position.
Contact Chris Garlick to discuss your taxation matter.
Chris Garlick | Taxation Lawyer
Australian and International Taxation Law