Australians living and working overseas may need to review their tax position before selling assets connected with Australia.

Under capital gains tax reforms announced in the 2026–27 Federal Budget, the current 50% CGT discount will generally be replaced by cost base indexation for relevant gains accruing from 1 July 2027. A minimum tax rate of 30% will also apply to certain capital gains under the new arrangements.

The reforms are not specifically targeted at Australians overseas. However, people who become foreign residents for Australian tax purposes may face different tax outcomes from those who remain Australian tax residents.

What Is Changing?

Under the current system, eligible Australian resident individuals may generally receive a 50% CGT discount when they dispose of an asset held for at least 12 months.

From 1 July 2027, the Government’s new arrangements will generally replace that discount with an inflation-based adjustment to the asset’s cost base. A minimum tax rate of 30% will also apply to relevant real capital gains.

The changes are prospective. This means the existing CGT discount rules will continue to apply to eligible gains accruing before 1 July 2027, even where the asset is sold after that date. The new rules will apply to relevant gains accruing from 1 July 2027.

Not every investor will necessarily pay more tax. The outcome will depend on factors including inflation, investment returns, the length of time the asset is held and the individual’s tax circumstances.

Why Australians Overseas Should Pay Attention

Tax residency is not determined by citizenship, permanent residency or visa status alone.

An Australian citizen or permanent resident living overseas may be treated as a foreign resident for tax purposes. Similarly, holding a valid Australian visa does not automatically make someone an Australian tax resident.

The Australian Taxation Office considers several factors when determining tax residency, including where a person ordinarily lives, whether they have established a permanent home overseas and the nature of their personal and financial ties to Australia.

This distinction can become important when an individual sells an asset while living outside Australia.

Media reports have highlighted modelling in which an investor who spent several years overseas faced almost $29,000 in additional tax. However, this figure is an example based on a particular set of circumstances. It is not a legislated cap, standard charge or amount that will apply to every Australian living overseas.

The actual tax outcome may be substantially lower or higher.

Which Assets May Be Relevant?

Foreign residents are generally subject to Australian CGT only in relation to assets that fall within the taxable Australian property rules.

These may include:

• Australian real property
• Certain indirect interests in Australian real property
• Assets used in carrying on a business through an Australian permanent establishment
• Certain assets for which a capital gain was deferred when the individual ceased being an Australian tax resident

Shares or managed fund investments are not automatically subject to Australian CGT simply because they are connected with an Australian company or fund. Their treatment will depend on the nature of the investment, the size of the interest and the individual’s circumstances.

Existing CGT Discount Rules for Foreign Residents

Foreign and temporary residents are generally unable to claim the full 50% CGT discount for gains accruing after 8 May 2012.

In some circumstances, a partial discount may still be available based on the periods during which the individual was an Australian tax resident.

This means people who move between Australia and another country may already need to divide a capital gain between different residency periods. The reforms commencing on 1 July 2027 may add another layer to that calculation.

Visa Status and Tax Residency Are Separate

Migration status and tax residency are assessed under different laws.

Receiving permanent residency does not automatically make someone an Australian tax resident. Likewise, leaving Australia while holding an active temporary or permanent visa does not automatically determine that the person has become a foreign resident for tax purposes.

What matters is the person’s actual living arrangements, intentions and ongoing connections with Australia.

A change in visa status may occur at the same time as a change in tax residency, but one does not necessarily cause the other.

Practical Steps to Consider

Australians living overseas, as well as visa holders who have moved offshore while retaining Australian assets, should consider:

• obtaining formal advice on their current Australian tax residency
• identifying which assets may fall within the taxable Australian property rules
• keeping records of asset values, acquisition costs and relevant residency dates
• reviewing the potential tax consequences before selling an asset
• considering how gains may need to be divided between periods before and after 1 July 2027
• seeking advice before making decisions based solely on citizenship, visa status or time spent overseas

People planning to leave Australia should also consider obtaining tax advice before departure. In some circumstances, ceasing to be an Australian tax resident can itself trigger CGT consequences for assets that are not taxable Australian property.

Key Takeaways

The new CGT reforms are scheduled to apply from 1 July 2027.

They are not a special tax directed only at Australians living overseas, but foreign tax residency may materially affect how a capital gain is calculated.

The widely reported figure of approximately $29,000 is based on a particular modelling example. It is not a universal liability or statutory maximum.

Tax residency and migration status are separate legal concepts.

Before selling Australian property or investments while living overseas, individuals should obtain advice from a registered Australian tax professional.

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The content of this article is intended for general informational purposes only and does not constitute legal advice. Immigration law is complex and subject to change. The information provided may not reflect the most current legal developments. For advice specific to your circumstances, please consult a registered Australian migration lawyer. For full terms governing use of this website and its content, please refer to our Website Terms and Conditions.

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