AUSTRALIA Law and Practice Contributed by: William Moore, Frank Hinoporos, Emma Woolley and Todd Bromwich, Hall & Wilcox
1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens Non-residents who own Australian real estate are sub - ject to specific tax requirements. Rental Income Non-resident individuals are taxed on Australian- sourced rental income at higher non-resident marginal rates, and do not benefit from the tax-free threshold. CGT Non-residents are liable for CGT on disposal of TAP, which broadly includes Australian real property and 10%+ interests in entities whose assets are mostly TAP. Non-residents are not subject to CGT on non- TAP assets. Legislative reform is currently proposed to broaden the definition of TAP. The main residence exemption is generally not avail - able to non-residents for property sold after 30 June 2020, with some exceptions. Non-residents are also not entitled to the 50% CGT discount that is available to Australian residents for assets held for more than 12 months. Foreign Resident Capital Gains Withholding When a non-resident sells Australian real property, the purchaser is required to withhold 15% of the market value (unless a variation is obtained) and remit it to the ATO. The actual CGT liability is determined when the non-resident lodges an Australian tax return, and any Several Australian states and territories impose addi - tional land tax and transfer duty surcharges on foreign owners. Rates and rules vary between jurisdictions. 1.6 Stability of Tax Laws Australia’s tax landscape is currently undergoing sig - nificant reform following the 2026–27 Federal Budget. As detailed in 1.1 Tax Regime , from 1 July 2027, net capital gains will be subject to a 30% minimum tax, with cost base indexation replacing the CGT discount, and from 1 July 2028, trustees of discretionary trusts will pay a minimum tax of 30%. These measures will have a material impact on tax and estate planning excess withholding is refunded. State and Territory Surcharges
1 July 2027. The main residence exemption remains available, and small business owners may be eligible for a range of CGT concessions. CGT Rollovers CGT rollover relief allows the deferral of capital gains in certain circumstances, such as corporate reorgani - sations, asset transfers within wholly owned groups, business restructures and certain life events, such as marriage or relationship breakdowns. Where rollover relief applies, the gain is deferred until a later CGT event occurs that does not qualify for an exemption or further rollover. 1.4 Pre-Immigration and Exit Planning Careful pre-immigration and departure planning can significantly reduce Australian tax exposure, as the tax treatment of tax residents and non-residents differs substantially. Foreign and temporary residents are generally not taxed on foreign-sourced income. Most CGT assets owned by the foreign resident at the time they become an Australian tax resident are deemed to be acquired at their market value at the time residency commenc - es. Accordingly, the timing of asset acquisitions, dis - posals and residency changes should be reviewed before relocation to Australia, and it may be necessary to obtain asset valuations. Ceasing Australian tax residency can trigger the “deemed disposal” of certain assets, resulting in CGT consequences. Becoming non-resident also means higher marginal tax rates on Australian-sourced income and loss of the tax-free threshold and CGT concessions. The timing of asset disposals relative to residency changes can materially affect the overall tax outcome. Separate rules apply for determining the tax residency of companies and trusts, which look to, among other things, the tax residency of the individuals who own and control them. If an individual plans to relocate between countries, it is crucial that they consider the impacts on their companies and trusts.
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