Government Announces Plans to Strengthen Foreign Capital Gains Tax Regime

The Australian government has unveiled its plans to strengthen the foreign capital gains tax regime, aiming to bring it in line with international standards and best practices. Treasurer Jim Chalmers released details of the proposed measures, which will tax foreign residents on capital gains from assets with a close economic connection to Australian land or natural resources.

These changes, set to take effect from July 1, 2025, include clarifying and broadening the types of assets subject to CGT for foreign residents, amending the principal asset test, and requiring notification to the Australian Taxation Office for certain high-value transactions.

The government also plans to increase the foreign resident capital gains withholding rate from 12.5% to 15% and remove the $750,000 threshold for withholding on transactions involving Australian real property. These changes aim to ensure foreign residents comply with their tax obligations in Australia and contribute to improving housing affordability for Australians.

Overall, these reforms seek to address integrity issues and uncertainty in the current foreign resident CGT regime, providing clarity and consistency in the taxation of assets with a close economic connection to Australian land or resources.