Newsletter
April 2013 Newsletter
No more CGT discount for non-residents
The Government has issued for comment draft legislation proposing to implement its 2012 Budget announcement that it will remove the capital gains tax (CGT) discount for non-resident individuals on taxable Australian property, such as residential and commercial real estate and mining assets.
Under the current law, individual taxpayers are generally entitled to a 50% discount on capital gains made from assets they have held for at least 12 months, regardless of the individual’s residency status. The proposed changes will introduce new residency requirements.
Under the changes, non-residents will still be entitled to a discount on capital gains that accrued prior to 9 May 2012 (ie, the day after the Government’s announcement), provided they obtain a market valuation of the asset as at 8 May 2012.
Note that, if implemented, the changes will apply to affected individuals irrespective of whether the gain resulted from an asset owned by the individual or was a gain from an asset held by a trust and attributed to the individual.
In summary, the effect of the measure will be to:
- retain the full CGT discount for discount capital gains of foreign resident individuals to the extent that the increase in value of the CGT asset occurred prior to 9 May 2012;
- remove the CGT discount for discount capital gains of foreign and temporary resident individuals that accrued after 8 May 2012; and
- apportion the CGT discount for discount capital gains where an individual has been an Australian resident and a foreign or temporary resident during the period after 8 May 2012. The discount percentage will be apportioned to ensure the full 50% discount is applied to periods where the individual was an Australian resident.