Last updated 23 September 2026. The tax figures on this page were checked against the ATO's published guidance on that date. Tax rules change, so check the linked ATO pages or speak to a registered tax agent before you act on anything here.
The 50% CGT discount you lose when you leave
If you've owned Australian property for more than 12 months as an Australian resident, you're entitled to a 50% discount on your capital gain before it gets taxed. That discount disappears the moment you become a non-resident for Australian tax purposes.
As a non-resident, you pay CGT on the full gain at your marginal tax rate. For most Australian expats earning well overseas, that's a meaningful difference — often tens of thousands of dollars on a single property sale.
Most people are aware there's a CGT difference for non-residents. What surprises them is the size of it.
When does the ATO consider you a non-resident?
The ATO uses a residency test — and it's not just about where you live. You're considered a non-resident if you don't have a "permanent place of abode" in Australia and your domicile has shifted overseas.
In practice: if you've moved to Singapore, Hong Kong, or Dubai for work, rented out your Australian home, and set up your life overseas — the ATO will typically treat you as a non-resident. This applies even if you hold an Australian passport and intend to return one day.
The residency question matters because it determines which CGT rules apply to your situation. Getting it wrong at the time of sale can be expensive and difficult to fix after the fact.
The main residence exemption and the 6-year rule
This is the part most expats have backwards, so it's worth being blunt. If you're a foreign resident for tax purposes on the date you sign the contract, you generally get no main residence exemption at all on a sale after 30 June 2020. Not a reduced one. The ATO's wording is that you aren't entitled to a partial or apportioned main residence exemption either, even if you were an Australian resident for part of the time you owned the property.
That matters because the 6-year rule is the thing most people have heard of. It lets an Australian resident keep treating a former home as their main residence for up to six years while it's rented out. It still exists and it still works, but it works for someone who is an Australian resident when they sell. Sell while you're a foreign resident and the six-year question usually never gets a chance to help you.
There is one narrow exception, which the ATO calls the life events test. You satisfy it only if both of these are true: you were a foreign resident for tax purposes for a continuous period of six years or less, and during that period one of the following happened:
- you, your spouse or your child under 18 years old had a terminal medical condition
- your spouse or your child under 18 years old died
- the CGT event happened because of a formal agreement following the breakdown of your marriage or relationship.
If you meet the life events test you can claim the exemption, and you can also use it as a reason to vary the withholding that would otherwise apply at settlement. If you don't meet it, you can't.
One timing point catches people out. For a sale under a contract, the ATO treats the disposal as happening when you enter into the contract, not when it settles. So the answer turns on your residency status on the day you sign. If you're an Australian resident at that point this doesn't affect you, unless you acquired the property because a foreign resident died. Whether you count as a resident or a foreign resident on a given date is exactly the question to put to a registered tax agent before you commit to a sale. The ATO sets out its own version on its main residence exemption for foreign residents page.
What CGT looks like in practice
Say you bought a property in Melbourne for $600,000 and it's now worth $950,000. Your capital gain is $350,000.
As an Australian resident selling after holding for more than 12 months: you'd apply the 50% discount, reducing the taxable gain to $175,000. That $175,000 gets added to your income and taxed at your marginal rate.
As a non-resident: the full $350,000 is taxable — no discount. At a marginal rate of 45%, the tax bill on that gain could exceed $150,000.
The Medicare levy doesn't add to that if you were a foreign resident for the whole income year, because you can claim a full exemption from it in your tax return. If you were a foreign resident for only part of the year, whether the exemption still covers that period depends on your dependants. The ATO sets out both cases on its foreign residents Medicare levy exemption page.
Same property. Same sale price. Very different tax outcome depending on residency status.
What about property bought after you became a non-resident?
If you bought the property as a non-resident — meaning you were already living overseas when you purchased — the 50% CGT discount doesn't apply at all. You never had Australian tax residency during ownership, so the discount was never available to you.
For investment properties purchased from overseas, the full capital gain is always taxable at marginal rates when you sell.
What to consider before selling
The most common situation we see: an expat has been overseas for several years, their Australian property has appreciated significantly, and they're thinking about selling. Before doing anything, it's worth working through a few questions:
- When exactly did you become a non-resident for ATO purposes?
- Was this property your main residence before you left?
- Will you be an Australian resident or a foreign resident for tax purposes on the day you sign the contract?
- What's your marginal tax rate for the year you plan to sell?
- Would selling in a different year change the outcome materially?
Timing the sale to align with a year of lower income — or returning to Australian tax residency before selling — can both affect the CGT outcome. These aren't simple decisions to make without proper tax advice, and the ATO rules on these points shift from time to time.
We're a mortgage brokerage, not tax advisers — so we can't give you personal tax advice here. What we can tell you is that every expat we work with who holds Australian property should have a conversation with an Australian tax professional before making decisions about selling.
Frequently asked questions
Do I still need to lodge an Australian tax return if I sell property as a non-resident?
Yes. Australian-sourced income — including capital gains on Australian property — is taxable in Australia regardless of your residency status. You'll need to lodge a tax return for the year you sell, even if you don't normally have Australian income to report.
What's the non-resident withholding tax on property sales?
Foreign resident capital gains withholding now applies at 15% of the property's market value, and there's no longer a minimum property value. The ATO sets the rate by the date the contract is signed rather than the settlement date. Contracts signed from 1 January 2025 fall under the 15% rate on property of any value. Contracts signed between 1 July 2017 and 31 December 2024 keep the earlier settings of 12.5%, and only where the property was valued at $750,000 or more. You can check both rates on the ATO's foreign resident capital gains withholding overview.
What stops the withholding depends on your residency status. An Australian resident for tax purposes applies for a clearance certificate and gives it to the buyer at or before settlement. A foreign resident isn't entitled to a clearance certificate and applies instead for a variation notice, which the ATO can set anywhere from 0% to 15% depending on the estimated tax on the sale. If the buyer has neither by settlement, they must withhold the full 15%.
The amount withheld isn't your final tax bill. It's credited in the tax return for the income year the contract was signed, and anything above your assessed liability is refunded. Clearance certificate applications are free and the ATO says they can take up to 28 days, so it pays to lodge early. Whether a variation is worth applying for in your situation is a question for an Australian tax agent.
Does CGT apply to my owner-occupied home in Australia?
If you owned and lived in the property as an Australian resident and you sell while you're still an Australian resident, you may be eligible for a full main residence exemption, and the 6-year rule can cover a period of renting it out. If you sell while you're a foreign resident for tax purposes, the position is different: for sales after 30 June 2020 the main residence exemption is generally not available at all, including any partial exemption, unless you meet the life events test set out above. Which side of that line you fall on depends on your residency status when you sign the contract, so get that confirmed before you sell.
Can I avoid CGT by returning to Australia before I sell?
Returning to Australia and re-establishing Australian tax residency before selling may restore some CGT benefits — including the 50% discount for the period you were a resident. The mechanics are complex and depend on timing, so specific tax advice is essential. This isn't a general workaround that applies cleanly to every situation.
Is this different for Australian citizens versus permanent residents?
Citizenship and tax residency are separate things. An Australian citizen living full-time in Singapore may well be a non-resident for ATO tax purposes — and vice versa. What matters is the ATO's residency test, not your passport.
If you're working through a property decision and want to understand how your borrowing situation fits alongside it, we're happy to work through the numbers with you. The loan and the tax question often come up together — it helps to look at them side by side.
Check your borrowing capacity with us, or get in touch to talk through your situation.
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