Australian CGT is not a separate tax. It is part of the income tax system. When you sell a CGT asset for more than its cost base, the net capital gain is added to your assessable income for the year and taxed at your marginal rate — subject to the 50% discount if you qualify. Capital losses reduce capital gains but cannot be offset against ordinary income.

CGT Assets

• Australian real property — residential, commercial, land
• Shares in Australian and foreign companies
• Units in managed funds, ETFs, and listed investment companies
• Cryptocurrency and digital assets
• Business assets including goodwill
• Collectibles (art, jewellery, rare items) above $500
• Personal use assets above $10,000

Calculating the Capital Gain

Capital Gain = Sale Proceeds − Cost Base

The cost base includes every dollar legitimately spent acquiring and holding the asset:

• Purchase price
• Stamp duty and legal/conveyancing fees at purchase
• Buyer’s agent fees
• Capital improvements (not repairs or maintenance)
• Agent commission and legal fees at sale
• Costs of title search and surveys

Every dollar added to the cost base reduces the taxable gain. Keep every receipt from the date of purchase through to sale — missing receipts cannot be reconstructed after the fact, and the ATO will not accept estimates for cost base items in an audit.

The CGT discount halves the assessable gain for assets held more than 12 months. It is one of the most significant tax concessions in the Australian system — and its interaction with residency status is where the largest practical differences arise for Indians in Australia.

Australian Tax Residents — Full 50% Discount Available

If you are an Australian tax resident on the day you sign the contract to sell, and you held the asset for more than 12 months, you get the full 50% discount. Only half the capital gain is included in assessable income, taxed at your marginal rate.

Non-Residents — Discount Generally Removed

For non-residents selling Australian property, the 50% CGT discount is generally not available on the gain accrued during the period of non-residency. For assets held partly as a resident and partly as a non-resident, the rules are complex — a partial discount may apply proportionate to the resident period, but this requires careful calculation.

The key practical rule: if you are a non-resident at the time of sale, assume the 50% discount is not available on your property gain unless a registered tax agent with non-resident CGT experience confirms otherwise for your specific circumstances.

FRCGW is the mechanism by which the ATO ensures non-residents pay their Australian CGT — rather than selling up and leaving with no Australian tax record. The buyer withholds a percentage of the purchase price at settlement and remits it to the ATO. This is not the final tax — it is a prepayment credited against the actual liability when the seller lodges their Australian tax return.

The Rules as of 1 January 2025 — Both Changed from Prior Version

How FRCGW Works in Practice

At settlement, the buyer (or their solicitor) withholds 15% of the gross purchase price and pays it directly to the ATO via a withholding payment form. The seller receives the net proceeds. The withheld amount appears as a credit in the ATO’s system under the seller’s TFN. When the seller lodges their Australian tax return for that financial year, the actual CGT liability is calculated and the FRCGW is credited against it. If FRCGW exceeds actual liability — a refund. If less — a top-up payment is required.

Clearance Certificate — For Australian Residents

Australian tax residents do not pay FRCGW — but they must prove their residency to the buyer. This is done via a clearance certificate from the ATO, applied for online at ato.gov.au. It is free, processed within 28 days, and must be provided to the buyer before settlement. Without a clearance certificate, the buyer is legally required to withhold 15% even from an Australian resident. Get the certificate early — do not leave it to the week before settlement.

Variation Notice — Reducing the Withholding Amount

If the 15% withholding would significantly exceed your actual CGT liability — for instance, because you have large capital losses to offset — you can apply to the ATO for a variation notice specifying a reduced withholding rate. The variation must be obtained before settlement. This requires estimating your actual liability and providing supporting calculations. A registered tax agent typically handles this for property transactions with large cost bases or significant capital losses.

The main residence exemption removes CGT on your family home. For Australian tax residents who lived in the property as their primary residence throughout ownership, the gain is entirely exempt — regardless of size. This is one of the most valuable concessions in Australian tax law.

For non-residents, this exemption was effectively removed from 1 July 2020. If you are a non-resident at the time of sale, you cannot claim the main residence exemption — even if you lived in the property for many years as an Australian resident before leaving the country. The exemption is determined by your residency status on the day of the contract, not your history in the property.

There are narrow exceptions — a life event (terminal illness, death of a spouse, relationship breakdown requiring a court-ordered sale) occurring within six years of becoming a non-resident can preserve a partial exemption in limited circumstances. These exceptions are fact-specific and require professional advice.

Example 1 — Australian PR Selling Investment Shares (50% Discount Applies)

Priya (PR, Melbourne, 37% marginal rate) bought ASX shares for $50,000 in August 2023 and sold for $82,000 in October 2024 — 14 months later.

Example 2 — NRI Selling Sydney Apartment (My Distressed Client)

Suresh (NRI, Delhi) sold his Sydney apartment. He had been a non-resident for 3 years at time of sale.

If Suresh had sold when he was still a resident (before relocating to Delhi), the 50% discount would have applied — assessable gain $211,500 at 37% = approximately $78,255 in tax. The cost of becoming a non-resident before selling was approximately $70,000 in additional tax. The renovation costs ($45,000) reduced his gain substantially — every capital improvement receipt matters.

Example 3 — Temporary Visa Holder Selling ASX Shares

Kavita (482 visa, temporary resident) sold her ASX portfolio of $95,000 for $130,000 — $35,000 gain, held 18 months.

Kavita’s gain is not taxable in Australia because listed ASX shares are not Taxable Australian Property for temporary residents. However, if she is also an Indian tax resident, she would need to declare this gain in her Indian ITR as a foreign source capital gain. Always verify your specific residency status with a tax agent — the TAP classification for some unlisted entities or trusts is more nuanced than for plain ASX shares.

When you sell an Australian asset and pay CGT in Australia, you may also face Indian tax obligations on the same gain — particularly if you are a Resident Indian in the year of sale. The India-Australia Double Tax Avoidance Agreement coordinates which country has taxing rights and how relief is available.

Key DTAA Articles for CGT

Claiming Foreign Tax Credit in India

If you are a Resident Indian in the year of sale, declare the Australian gain in your Indian ITR under Schedule FSI (Foreign Source Income) and Schedule CG (Capital Gains). File Form 67 — the mandatory Foreign Tax Credit form — on or before the Indian ITR due date. The credit for Australian CGT reduces your Indian tax liability on the same gain. Form 67 filed after the ITR due date is rejected — the credit is permanently lost for that year.

The credit is capped at the Indian tax on that income — so if you paid more in Australia than India would have charged, the excess is not refundable by India. If you paid less in Australia than India’s rate, you pay the difference to India. The relief prevents double taxation, not tax reduction below either country’s rate.

Assuming the FRCGW rate is still 12.5% or the $750,000 threshold still applies:
Both changed from 1 January 2025. The rate is 15% and applies to every property sale involving a non-resident — no minimum threshold. A $400,000 unit now triggers $60,000 of withholding at settlement if the seller is a non-resident. Budget for this before contracting to sell.

Not lodging an Australian tax return after the property sale:
FRCGW is a withholding — not the final tax. To determine whether you owe more or are owed a refund, you must lodge an Australian return for the year of sale. Many NRIs assume the FRCGW is their complete obligation and never lodge — forfeiting their refund permanently and technically remaining non-compliant. The ATO has FRCGW data from every settlement and will eventually follow up.

Not including all cost base items:
Every dollar of cost base reduces the taxable gain. Stamp duty (often 4–5% of purchase price), legal fees, renovation costs, capital improvements — all legitimately included. Missing these inflates your gain and your tax. Keep every receipt from purchase date onwards, in a dedicated folder, indexed by property address.

Selling just before the 12-month anniversary as a resident:
The difference between 11 months 3 weeks and 12 months 1 week is the 50% CGT discount — on a $300,000 gain at 37%, that is approximately $55,500 in tax. Check your purchase contract date and count carefully. For investment property, residential property, and shares, this timing decision is almost always worth getting right.
Australia Tax Saving Tips & Strategies 2025-26 — Complete Guide