Non-Resident CGT Is Not 80% — Here's What You Actually Pay

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

A claim circulating on social media says non-residents of Australia face an effective tax rate of 80% when selling property. This is wrong. The confusion comes from conflating three separate rules — and misunderstanding how one of them works.

Where the “80%” comes from

People arrive at 80% by stacking these numbers:

Rule	Number	What it actually is
Top marginal rate (non-resident)	45%	Tax on income above $190,000
No 50% CGT discount	”doubles” the tax	Full gain is taxable, not half
FRCGW (withholding at settlement)	15% of sale price	Refundable prepayment, not a tax

Adding 45% + 15% gets you to 60%. Comparing non-resident CGT to what a resident would pay (roughly half) inflates the perceived rate further. But this arithmetic is flawed for several reasons.

Why the maths is wrong

1. The 15% withholding is not a tax

Foreign resident capital gains withholding (FRCGW) is a prepayment collected at settlement. When you lodge your tax return, the ATO credits this amount against your actual tax liability. If 15% of the sale price exceeds the tax you owe, the difference is refunded.

For a $1 million property with a $300,000 capital gain, the withholding is $150,000 (15% of sale price) — but the actual CGT might only be $135,000. The $15,000 difference comes back to you.

2. The 45% rate only applies above $190,000

Non-resident tax rates are progressive, not flat:

Taxable income	Rate
$0 – $135,000	30%
$135,001 – $190,000	37%
$190,001+	45%

A $300,000 capital gain (with no other Australian income) produces blended tax of $110,350 — an effective rate of 36.8%, not 45%.

3. Comparing to resident rates is not the same as paying more

It is true that residents who hold an asset for 12+ months get a 50% CGT discount that non-residents do not. A resident with the same $300,000 gain would include only $150,000 in assessable income, paying about $39,838 in tax (including Medicare levy).

The non-resident pays roughly 2.8 times more — but the effective rate is ~37% on the gain, not 80%.

Worked example: $800,000 property sold for $1.1 million

Step	Resident	Non-resident
Sale price	$1,100,000	$1,100,000
Cost base	$800,000	$800,000
Capital gain	$300,000	$300,000
50% CGT discount	-$150,000	Not available
Taxable gain	$150,000	$300,000
Tax (no other income, inc. Medicare for resident)	$39,838	$110,350
Effective rate on gain	13.3%	36.8%
FRCGW withheld at settlement	N/A	$165,000
Refund of excess withholding	N/A	$54,650

The non-resident pays roughly 2.8 times more CGT than the resident — a significant difference, but nowhere near 80%.

What non-residents should actually watch for

• No CGT discount on assets acquired after 8 May 2012. This is the biggest cost difference.
• No main residence exemption if you were non-resident when you sold, unless you meet the life events test (see main residence exemption for foreign residents).
• FRCGW applies at settlement — you need cash flow to cover the 15% withholding even though it is refundable.
• No tax-free threshold — the first dollar of Australian income is taxed at 30%.

Key takeaways

1. The “80% tax” claim is a myth based on misunderstanding withholding rules
2. FRCGW (15% of sale price) is a refundable prepayment, not an additional tax
3. The highest effective CGT rate for non-residents is about 45% on gains above $190,000 — and blended rates are typically lower
4. Non-residents do pay significantly more CGT than residents due to losing the 50% discount
5. Plan ahead: apply for a withholding variation if 15% of the sale price would over-withhold

Sources

• ATO: Tax rates for foreign residents
• ATO: CGT discount for foreign residents
• ATO: Foreign resident CGT withholding overview

Related tools

• Capital Gains Tax Calculator — model your actual CGT liability as a resident or non-resident
• Sell this year vs next year — compare timing strategies