Section 160T of the Income Tax Assessment Act 1936 set the original rule for Australian CGT on non-residents, but it no longer governs the tax directly. Its provisions have been superseded by Division 855 of the Income Tax Assessment Act 1997, which keeps the same core principle: a foreign resident pays Australian capital gains tax only on assets classified as “taxable Australian property,” and can disregard capital gains or losses on everything else. If you are researching 160T, section 855-10 is the operative rule today, and section 855-15 defines the assets that fall inside the net.
What Counts as Taxable Australian Property
Four categories of asset trigger CGT for a non-resident on disposal:
- Real property in Australia, meaning land, buildings, and any interest in Australian land. This is the category most non-residents encounter when selling investment property.
- Assets used in a permanent establishment, such as business equipment and machinery tied to a fixed place of business in Australia. A foreign company running operations from an Australian office or factory has its business assets caught here.
- Indirect interests in Australian real property, meaning shares or units in an entity whose value is mainly attributable to Australian real property. This prevents investors from sidestepping CGT by holding land through a corporate wrapper and selling the shares.
- Options or rights over any of the above.
The indirect interest category has two tests, and both must be satisfied. The principal asset test asks whether the entity’s market value is mainly attributable to Australian real property. The non-portfolio interest test requires that you and your associates together hold 10% or more of the entity. Only when both are met does a share or unit disposal become a taxable event for a non-resident.
Assets That Fall Outside the CGT Net
Assets without a genuine economic link to Australia sit outside the CGT rules for non-residents entirely. A foreign investor who disposes of Australian bank deposits, publicly traded shares held below the 10% threshold, or personal property unconnected to an Australian business generally owes nothing on the gain. Intangible property such as patents and intellectual property is more nuanced and generally must be registered or actively used in Australia to create a sufficient connection.
This boundary matters because it protects foreign investors from being taxed on assets that happen to carry an Australian label but lack real economic substance in the country. If your asset is not on the taxable Australian property list, the gain is disregarded under section 855-10 and there is nothing to report as an Australian capital gain.
CGT Discount Restrictions for Non-Residents
Australian residents who hold a CGT asset for more than 12 months can apply a 50% discount, effectively halving the taxable gain. Non-residents face restrictions that can substantially increase the tax bill.
If you acquired the asset after 8 May 2012 and were a foreign resident for your entire ownership period, you get no CGT discount at all. If you were an Australian resident for part of the ownership period, you can claim an apportioned discount covering only the days of Australian residency.
Assets acquired on or before 8 May 2012 have more favorable treatment. Non-residents who owned qualifying assets before that date may still apply a discount, either pro-rated for their period of Australian residency after 8 May 2012 or calculated using the market value of the asset on that date. You can choose whichever method produces the lower taxable gain.
For assets acquired before 21 September 1999, the indexation method remains available as an alternative. Indexation adjusts the cost base for inflation up to September 1999, which can be more advantageous in some situations, particularly when you also have capital losses. You cannot use both indexation and the CGT discount on the same asset.
The 15% Foreign Resident Capital Gains Withholding
Since 1 January 2025, buyers of Australian real property must withhold 15% of the purchase price and pay it to the Australian Taxation Office unless the seller provides a valid clearance certificate. The withholding applies to all property sales regardless of sale price, after the previous $750,000 threshold was removed.
The withholding is not a separate tax. It works as a prepayment toward the seller’s CGT liability. When the non-resident lodges their Australian tax return, the withheld amount is credited against whatever they actually owe, and any excess is refunded.
Australian residents selling property also need a clearance certificate to avoid the withholding. Applications should be lodged at least 28 days before settlement, and certificates are valid for 12 months. If the seller does not provide a certificate by settlement, the buyer is legally required to withhold the 15% regardless of the seller’s actual residency status.
Calculating the Gain
The taxable gain is the difference between what you received for the asset and its cost base. The cost base includes five elements that go beyond the original purchase price:
- Acquisition cost, being the money paid or property exchanged to acquire the asset.
- Incidental costs, including fees for surveyors, valuers, auctioneers, accountants, brokers, agents, and legal advisers, plus stamp duty, advertising costs, and search fees.
- Ownership costs, such as rates, land taxes, repairs, insurance premiums, and non-deductible interest on loans used to finance the asset.
- Capital improvements, such as renovations or zoning change applications.
- Title defense costs, meaning capital expenditure to preserve or defend your ownership or rights.
Every dollar added to the cost base reduces the taxable gain, so thorough record-keeping matters. Failure to provide receipts or contracts can lead the ATO to estimate values, and those estimates rarely work in the taxpayer’s favor. Keep records for at least five years after selling the asset.
Lodging and Paying
Non-residents who dispose of taxable Australian property must lodge an Australian tax return for the year the sale occurred, using the CGT schedule that accompanies the return. Returns can be submitted electronically or on paper, with electronic returns generally processed within 12 business days and paper returns taking up to 50.
The ATO charges a general interest charge on unpaid amounts, which varies quarterly. For the 2025–26 income year, the GIC annual rate has ranged from approximately 10.61% to 10.96%.
Failing to lodge on time triggers a separate penalty of one penalty unit for each 28-day period the return is overdue, capped at five penalty units. As of November 2024, a penalty unit is $330, so the maximum failure-to-lodge penalty for an individual is $1,650. These penalties apply on top of any interest charges on unpaid tax.