What is an Australian, foreign and temporary resident?
You are an Australian resident for tax purposes if you reside in Australia or if you satisfy one of the following statutory tests:
If you are not an Australian resident for tax purposes, you are a foreign resident. A foreign resident is also referred to as a non-resident.
You are a temporary resident if:
- you have a temporary visa
- both you and your spouse are not Australian residents within the meaning of the Social Security Act 1991 (that is, not an Australian citizen or permanent resident or a protected Special Category visa holder from New Zealand).
You won't be a temporary resident if, at any time after 6 April 2006, you have been an Australian resident and:
- you didn't have a temporary visa
- either you and your spouse were Australian residents within the meaning of the Social Security Act 1991 (that is, are an Australian citizen or permanent resident or a protected Special Category visa holder from New Zealand).
A temporary resident may be an Australian resident for tax purposes or a foreign resident. If you satisfy the requirements for being a temporary resident, your capital gains will be taxed in the same way as a foreign resident.
Becoming an Australian resident
When you become an Australian resident for tax purposes (other than a temporary resident), you are taken to have acquired your CGT assets at the same time, for their market value at that time. This is sometimes called 'deemed acquisition'.
This does not apply to assets:
- you acquired before CGT started on 20 September 1985
- that were taxable Australian property, such as real estate in Australia and assets used to carry on a business in Australia – The general cost base rules apply to taxable Australian property.
Example: becoming an Australian resident
Alex became an Australian resident for tax purposes on 15 May 2023.
Alex owns CGT assets. He owns shares in several different public companies.
We consider that Alex acquired his CGT assets on 15 May 2023 when he became an Australian resident for tax purposes. The cost of Alex's shares will be their market value on 15 May 2023.
End of exampleIf you stop being an Australian resident
If you stop being an Australian resident for tax purposes, you are taken to have disposed of CGT assets for their market value at the time you stopped being a resident. The CGT assets don't include taxable Australian property. This is sometimes called 'deemed disposal'.
The same applies if you stop being a resident trust for CGT purposes.
Foreign and temporary residents are subject to CGT only on taxable Australian property. This is the reason you are not taken to have disposed of these particular CGT assets when you stop being an Australian resident for tax purposes.
If you stop being an Australian resident for tax purposes, the CGT discount will not be available when you dispose of an asset that you acquired after 8 May 2012.
If you have any indirect Australian real property interests, or options or rights to acquire such interests, you are taken to have immediately re-acquired these assets for their market value.
Example: stops being an Australian resident
Jemima and Maurice were born in Australia and have always resided in Australia. Maurice gets a job in Italy, so Jemima and Maurice decide to move to there permanently.
Maurice and Jemima jointly own an apartment which they decide to keep and rent out. Jemima and Maurice also own some shares in publicly listed companies.
They leave Australia on 15 January 2023 and cease to be Australian residents at that date.
As Jemima and Maurice have stopped being Australian residents, they are taken to have disposed of their shares for market value at 15 January 2023.
Jemima and Maurice are not taken to have disposed of their apartment because it is taxable Australian property. A CGT event will occur in respect of the apartment, when they dispose of it.
End of exampleExemption for temporary residents
If you are a temporary resident when you stop being an Australian resident, you are not taken to have disposed of any of your assets.
Anyone who is an Australian resident for tax purposes after 6 April 2006 but is not a temporary resident can't later become a temporary resident, even if they later hold a temporary visa.
Choosing to disregard capital gains and losses
An individual can choose to disregard all capital gains and losses when they stop being an Australian resident for tax purposes.
If you do this, your assets are taken to be taxable Australian property until the earlier of:
- a CGT event happening to the assets (for example, their sale or disposal)
- you again becoming an Australian resident.
The effect of this choice is that the increase or decrease in the value of your assets after you stop being a resident is taken into account in working out your capital gains or losses on those assets. You don't need to tell us what you decide – the way you prepare your tax return is generally sufficient evidence of your choice.
If you stop being a temporary resident
If you stop being a temporary resident and remain an Australian resident, you are taken to have acquired your CGT assets that are not taxable Australian property for their market value at the time you stopped being a temporary resident.
This rule does not apply to employee shares and rights.
Example: becoming an Australian resident
Fred has lived most of his life in London. He is single. He owns several apartments in and around London that are leased to tenants. He also has a share portfolio that provides him with regular dividend income.
On 12 December 2017, Fred arrived in Brisbane to begin work with an Australian company. For the first 3 years Fred held a temporary visa and expected to eventually return to the United Kingdom. During this period he was a temporary resident as he held a temporary visa and met the other criteria for being a temporary resident.
On 15 March 2022 Fred applied for, and was granted, permanent residency in Australia.
The CGT implications for Fred are as follows.
For assets disposed of between 12 December 2017 and 14 March 2022
Fred was a temporary resident and was only subject to CGT in Australia on any assets that were taxable Australian property.
For assets disposed of on or after 15 March 2022
Fred is an Australian resident and is now subject to tax in Australia on his worldwide income and capital gains. Any capital gains or capital losses Fred makes on the assets held in the UK will be subject to CGT in Australia. The cost base for these assets will be set according to the market value of the assets on 15 March 2022. Fred will receive a foreign tax credit for any tax paid in the UK on these gains.
End of example