Overview of Proposed Non-Resident CGT Changes
The Australian Government has proposed amendments to Division 855 of the Income Tax Assessment Act 1997, aimed at updating and expanding the Capital Gains Tax (CGT) liabilities for foreign residents. These changes were announced recently and are not yet law.(ato.gov.au)
What’s Changing from 1 July 2025
- Broader asset types: Greater clarity and expansion of which assets foreign residents are taxed on in Australia.(ato.gov.au)
- Principal asset test extended: The period for this test becomes 365 days, increasing exposure for foreign holders.(ato.gov.au)
- Notification threshold: Foreign residents disposing of shares or membership interests worth over A$20 million will need to notify the ATO before executing the sale.(ato.gov.au)
Implications for Foreign Investors
- A foreign investor with A$25 million of shares in an Australian entity will need to notify the ATO prior to sale—failure could carry penalties.
- The broadened asset scope may capture indirect interests or membership interests not formerly included.
Practical Advice for Digital Nomics & Non-Residents
- Review your portfolio: Check whether any assets might now fall into scope under the broadened definitions.
- Plan ahead: If you're disposing of any shares or membership interests exceeding A$20M, ensure notification in advance.
- Seek valuations: Accurate valuation will be essential, especially with the 365-day test.
- Tax compliance: Work with advisors to understand whether exemptions or treaties apply.
Real-world Example
- Anna holds a A$30M shareholding in an Australian company. She plans to sell in September 2025. Under the new rules, Anna must notify the ATO before the transaction—if she doesn’t, her transaction may face unexpected withholding or penalties.
- But if a foreign resident sells an asset for A$10M, no notification is needed—but they’re still bound by other CGT rules.
Action Plan Before 1 July 2025
- Identify any share or membership interest holdings that may exceed A$20M or may become so due to market movements.
- Engage with legal/tax advisors who know international tax and treaties.
- Consider structuring or sell-timing decisions to manage liability.
- Monitor announcements for when the proposed law becomes enacted.
Why It Matters: These changes signify tightening of transparency and tax collection from foreign investors. For those outside Australia, knowing about obligation in advance can avoid surprise liabilities.