Changes to the capital gains tax (CGT) discount for foreign resident individuals
The CGT discount, previously known as the CGT 50% was available to foreign resident individuals on taxable Australian property.
In the 2012-2013 Budget, the government announced changes to the application of the CGT discount. These changes became law on 29 June 2013.
What has changed?
From 8 May 2012, foreign or temporary resident individuals must meet certain eligibility conditions to apply for the CGT discount.
For the CGT events occurring after 8 May 2012, the application of a CGT discount percentage will depend on:
• Whether the CGT asset was held before or after 8 May 2012, and
• The residency status of the individual who has the capital gain
Who is affected?
This change affects individuals (including a beneficiary of a trust and a partner in a partnership), who are:
• A foreign or temporary resident
• An Australian resident with a period of foreign residency after that date
• Had a discount capital gain from a CGT event that occurred after 8 May 2012
You are not affected by this change if the CGT event occurred before 8 May 2012.
How do the changes affect foreign or temporary residents?
You must calculate the CGT discount you can apply to the capital gain if you are a foreign or temporary resident individual, and, after 8 May 2012, you have a discount capital gain from a CGT event.
If you were a foreign or temporary resident on 8 May 2012, you may wish to get a market value for the CGT asset as at 8 May 2012 and use a market rate calculation. This will apportion the CGT discount to take into account the capital gain you have that was accrued before 8 May 2012.
How do the changes affect Australian residents?
You must calculate the CGT discount you can apply to the capital gain you have if you are an Australian resident and, after 8 May 2012, you have:
• A capital gain from a CGT event, and
• A period of foreign or temporary residency.
The period of foreign or temporary residency after 8 May 2012 is taken into account when calculating the CGT discount you can apply to your capital gain.
If you believe you may fall under this category and need assistance in determining whether you are eligible for the 50% discount, contact our tax lawyers and tax accountants at The Quinn Group. We can provide advice in an easy to understand way and assist with the CGT calculations. Contact us on 02 9223 9166 or submit an online enquiry.