In the 2012 Federal Budget the Government announced that the CGT discount would no longer apply to gains made by foreign residents. However, the CGT discount will still apply to the portion of the discount capital gain of a foreign resident individual that accrued up until the date of announcement (8 May 2012) provided that they obtain a market valuation of the property as at that date. The legislation enacting these changes has now been passed.
Generally, foreign and temporary resident individuals are only subject to CGT on Australian residential and commercial real estate.
The new rules will apportion the discount percentage applied to reduce discount capital gains to ensure that the full 50 per cent CGT discount is only available for periods in which a CGT asset was held:
- prior to 9 May 2012; and
- after 8 May 2012 during which the individual was an Australian resident.
The rules will apply where:
- an individual was a foreign resident or a temporary resident at any time on or after 8 May 2012; and
- the individual makes a discount capital gain directly (or indirectly as a beneficiary of a trust), from a CGT event that occurred after 8 May 2012.
If you own property in Australia and you will be moving overseas, or if you are a foreign or temporary resident who owns Australian property, these changes may affect you. We recommended that you seek our advice in relation to the new rules and how they may apply in your circumstances.