Australia: Consultations on changes to foreign resident capital gains tax, foreign resident withholding tax regimes

The government initiated consultations on proposed changes to the foreign resident capital gains tax and withholding tax regimes.

• A consultation paper entitled “Strengthening the Foreign Resident Capital Gains Tax Regime” details three elements of a measure announced in the 2024–2025 budget (read TaxNewsFlash) that would clarify and broaden the types of assets on which foreign residents are subject to capital gains tax, amend the point-in-time principal asset test to a 365-day testing period, and require foreign residents disposing of shares and other membership interests exceeding $20 million* to notify the Australian Taxation Office (ATO) prior to executing the transaction. The measure, which would be effective July 1, 2025, would align the treatment for nonresidents more closely with that of Australian residents. The consultation closes August 20, 2024.
• Treasury Laws Amendment Bill 2024: Foreign Resident Capital Gains Withholding Payments would increase the foreign resident capital gains withholding tax rate for relevant capital gains assets from 12.5% to 15% and remove the current $750,000 threshold before which withholding applies for transactions involving either taxable Australian real property or an indirect Australian real property interest that provides company title interests. The changes would be effective January 1, 2025. Consultation on the draft bill closes August 5, 2024.

*$=Australian dollar