Taxable Australian property
Taxable Australian property includes:
- a direct interest in real property situated in Australia
- a mining, quarrying or prospecting right to minerals, petroleum or quarry materials situated in Australia
- a capital gains tax (CGT) asset that you have used at any time in carrying on a business through a permanent establishment in Australia
- an indirect interest in Australian real property – you and your associates hold 10% or more of an entity including a foreign entity, and the value of your interest is principally attributable to Australian real property.
Taxable Australian property also includes an option or right over one of the above.
For CGT events happening on or after 20 May 2009, a leasehold interest in land situated in Australia is 'real property situated in Australia'.
Certain CGT assets will also be taken to be taxable Australian property if you take the option of Choosing to disregard capital gains and capital losses when you cease being an Australian resident.
If you acquired an indirect interest in Australian real property before 11 May 2005, you are taken to have acquired it at its market value on the previous day (10 May 2005) if:
- you are a foreign resident or the trustee of a trust that was not a resident trust for CGT purposes
- the interest did not have the 'necessary connection with Australia'
- the interest is 'taxable Australian property'.
Foreign residents must apply functional currency rules for the calculation of capital gains and losses on disposal of indirect Australian real property interests where the sole or predominant currency in which they keep their accounts is a foreign currency.
Foreign resident capital gains withholding payments
The foreign resident capital gains withholding regime can apply in the 2016 income year to foreign residents with a 2016 income tax year ending after 30 June 2016, in relation to contracts entered into on or after 1 July 2016.
A 10 percent non-final withholding obligation will apply to the disposal of:
- taxable Australian real property with a market value of more than $2 million
- an indirect Australian real property interest
- an option or right to acquire such property or interest.
Where the seller of these Australian assets is a foreign resident, the buyer must pay 10 per cent of the purchase price to the ATO as a foreign resident capital gains withholding payment.
The foreign resident vendor can claim a credit for the foreign resident capital gains withholding payment by lodging a tax return for the relevant year.
See New legislation for more information about foreign resident capitals gains withholding:
- exclusions, and