Non-resident and 50% CGT Discount

Q&A Tax

Question :

Mr. Chan bought an apartment in Sydney in 2013. At the time of the purchase, he was an Australian
resident for tax purpose and had Permanent Resident Visa. In 2015, he took a job in Shanghai and
stayed there for 4 years. During the 4 years in Shanghai, he was not an Australian resident. In 2019, he
returned to Sydney and sold the apartment.

Is he still eligible for 50% CGT discount for the sale of the apartment in 2019? To what extent?

 

Answer :

Section 115.115 states: The 50% CGT Discount for individuals is apportioned where a CGT event
happens after 8 May 2012 and:

– you acquired the asset before that date, or
– you had a period of Australian residency after that date.

Briefly, if you bought your property after 8 May 2012 then the CGT Discount rate is calculated as:

(Number of days during discount testing period that you were an Australian resident) / (2×Number of
days in discount testing period)

In Mr. Chan’s case, the discount testing period is the time between he bought the apartment and sold
the apartment. To simplify the calculation, we take year to calculate in the formula (You need to work
out the exact number of days to calculate in real life situation).

He holds the property for 7 years (from 2013 to 2019) of which 4 years is non-resident. Then he can
only claim 2/(2×7)= 14.29% CGT Discount for the sale of the apartment.

You also need to note that, The time period that you are an Australian resident excludes the time
period of temporary resident after 8 May 2012.

You’re a temporary resident if you:

– hold a temporary visa granted under the Migration Act 1958
– are not an Australian resident within the meaning of the Social Security Act 1991
– do not have a spouse who is an Australian resident within the meaning of the Social Security Act
1991.

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