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Australia tax on capital gains for US expats: 2026 guide
Australia’s tax on capital gains applies at your marginal income tax rate. The US uses separate long-term and short-term brackets – 0%, 15%, or 20% for assets held over one year (2025).
The foreign tax credit on Form 1116 prevents most double taxation but requires careful reporting.
This guide covers how the Australian CGT system works, what it means for your US return, and where the two systems create traps that cost expats real money.
Capital gains tax for Australian expats means reporting gains to both the ATO and the IRS – this guide walks through each layer.
- Australia offers a 50% CGT discount for residents who hold an asset longer than 12 months. Foreign residents lost access to this discount on gains accrued after 8 May 2012. Australia announced in the 2026–27 Budget that from 1 July 2027 the 50% CGT discount for resident individuals, trusts and partnerships will be replaced by cost base indexation on gains accruing on or after that date, with a minimum 30% tax on certain net capital gains. The changes do not apply to the 2025–26 Australian tax return.
- The US taxes long-term capital gains at preferential rates of 0%, 15%, or 20% depending on taxable income (2025).
- US expats report Australian capital gains on Form 8949 and Schedule D, then claim any Australian tax paid through Form 1116.
- The 2026 expat filing deadline is June 15, 2026 – an automatic two-month extension for US citizens living abroad. Interest on any unpaid tax still runs from April 15, 2026.
- Australia does not have a separate capital gains tax. The net gain is added to your assessable income and taxed at your marginal rate.
- The foreign earned income exclusion does not apply to capital gains – only the foreign tax credit offsets Australian CGT against US tax.
How does capital gains tax work in Australia?
Australia does not impose a standalone capital gains tax. The net capital gain is added to your assessable income and taxed at your ordinary marginal rate – the same brackets that apply to salary and wages. The Australian tax year runs July 1 to June 30.
CGT events
A CGT event is triggered when you dispose of an asset.
The most common trigger is CGT event A1 – a sale, gift, or transfer. For US expats leaving Australia, CGT event I1 applies: ceasing to be an Australian tax resident is treated as a deemed disposal of most assets at market value on the departure date.
In practice, you calculate the capital gain as the difference between your capital proceeds and your cost base, apply any available discount or exemption, and include the net amount in your tax return.
Pre-CGT assets and exemptions
Assets acquired before 20 September 1985 are exempt from CGT entirely. Personal use assets – furniture, boats, and similar household items – are exempt from CGT if they cost AUD 10,000 or less to acquire. Cars and motorcycles work differently: The ATO doesn’t treat them as personal use assets at all, so they’re exempt regardless of value.
The ATO does not recognise the US treatment of capital gains as a separate tax category.
From Australia’s perspective, CGT is part of income tax – a distinction that matters when you claim the foreign tax credit on Form 1116, because the IRS treats Australian tax paid on a capital gain as tax in the passive category.
How to calculate capital gains tax in Australia
Based on a common TFX client scenario, here is the standard calculation:
- Start with capital proceeds – the amount you received or were deemed to receive on disposal.
- Subtract the cost base – the purchase price plus incidental costs like stamp duty, legal fees, and agent commissions, plus capital improvements.
- Apply the CGT discount if eligible – 50% for Australian residents who held the asset for at least 12 months. Foreign residents who acquired their asset after 8 May 2012 receive no discount.
- Apply any rollovers or exemptions – such as the main residence exemption or small business concessions.
- Convert to USD – the IRS requires the gain to be reported in US dollars. Convert the cost base at the exchange rate on the acquisition date and the proceeds at the rate on the disposal date.
- Report on Form 8949 – the IRS measures the gain in US dollars, so changes in the AUD/USD exchange rate between purchase and sale can create a different gain or loss than the one reported to the ATO.
The cost base in Australia includes five elements: acquisition cost, incidental costs, ownership costs for non-deductible expenses on non-depreciating assets, capital expenditure to increase the asset’s value, and costs of preserving or defending your title.
If you bought a Sydney apartment in 2015 when AUD/USD was 0.72 and sold it in 2025 when the rate was 0.65, the exchange rate movement alone creates a different USD-denominated gain than what the ATO sees – and that gap is taxable on Form 8949.
Australia long-term vs short-term capital gains and the 50% discount holding period
- Under 12 months – the full gain is included in assessable income and taxed at your marginal rate. No discount.
- 12 months or more – individual Australian residents qualify for a 50% CGT discount, effectively halving the taxable gain before it hits the marginal bracket.
How the US treats the same gain
The IRS ignores the Australian discount. The US taxable gain is the full proceeds minus the full cost base, measured in USD, with its own holding-period test:
- Short-term – one year or less – taxed at ordinary income rates, up to 37% (2025).
- Long-term – over one year – preferential rates of 0%, 15%, or 20% (2025).
Australia announced in the 2026–27 Budget that from 1 July 2027 the 50% CGT discount for resident individuals, trusts and partnerships will be replaced by cost base indexation on gains accruing on or after that date, with a minimum 30% tax on certain net capital gains. The changes do not apply to the 2025–26 Australian tax return
Australia’s capital gain tax rate: residents vs non-residents
The rate is not a flat percentage – it is whatever marginal bracket your total taxable income falls into after the net capital gain is added.
| Australian resident | Foreign resident | US federal (2025) | |
|---|---|---|---|
| CGT discount | 50% for assets held 12+ months | None on gains accrued after 8 May 2012 | N/A – separate long-term rates apply |
| Rate basis | Marginal income tax rates with tax-free threshold | Marginal rates with no tax-free threshold; first dollar taxed at 30% for the 2025–26 Australian income year and 32.5% for 2024–25 | 0% / 15% / 20% long-term; ordinary rates for short-term |
| Main residence exemption | Available | Removed for disposals after 30 June 2020, though a life events exception can still apply to those who have been foreign residents for six continuous years or less; transitional relief covered homes bought before 9 May 2017 and sold by 30 June 2020 | Section 121 exclusion – $250,000 single / $500,000 MFJ |
What this means for US expats
- Australian tax residents – the 50% discount plus the FTC on Form 1116 typically means little or no additional US tax on long-term gains. The Australian tax paid – even after the discount – often exceeds the US rate.
- Foreign residents – the discount and tax-free threshold are both unavailable, so the effective Australian rate is higher. They can generally offset more of that Australian tax against US tax through the FTC.
Capital gains tax exemptions in Australia
The main Australian CGT exemptions are the main residence exemption, assets acquired before 20 September 1985, and most personal use assets.
- Main residence exemption – your home is fully exempt from CGT while you live in it and for up to six years after you move out if it is rented, known as the absence rule. Foreign residents lose this exemption for a home disposed of after 30 June 2020, unless they meet the ATO’s life events test. It requires a continuous foreign-residency period of six years or less, plus a qualifying event in that time: a terminal medical condition affecting the seller, their spouse, or their child under 18; the death of their spouse or child under 18; or a formal agreement, including a binding financial agreement and not only a court order, after a marriage or relationship breakdown. Homes bought before 7:30 PM AEST on 9 May 2017 and sold by 30 June 2020 qualified under transitional relief without this test.
- Pre-20 September 1985 assets – anything acquired before CGT was introduced is fully exempt, regardless of the gain.
- Personal use assets under AUD 10,000 – furniture, appliances, boats at or under this threshold. Cars and motorcycles are exempt regardless of value.
- Small business concessions – businesses with aggregated turnover under AUD 2 million or net CGT assets under AUD 6 million can access a 50% active asset reduction, the 15-year exemption, retirement exemption, and rollover relief. These are separate from the individual 50% discount and can stack.
- Superannuation – a lump-sum payment from a taxed super fund is not a capital gains tax matter at all. It is taxed under Australia’s superannuation benefit rules, and a payment to a member aged 60 or over is generally tax-free.
These Australian exemptions do not carry over to the US return. An exempt Australian gain may still be taxable on Form 8949. The Section 121 exclusion is the only US-side relief that covers a home sale, and it has its own ownership and use tests.
If your super fund holds managed investments, those may be PFICs – a separate reporting issue covered below.
Capital gains tax on a primary residence in Australia: main residence exemption vs US Section 121
Based on a common TFX client scenario: a US citizen sells an Australian home for AUD 1,200,000 that was purchased for AUD 800,000.
In Australia, the main residence exemption eliminates the AUD 400,000 gain entirely – provided the seller is an Australian tax resident and lived in the property as their main residence.
The US applies Section 121, which excludes up to $250,000 of gain for a single filer or $500,000 for a married couple filing jointly (2025).
The IRS measures the gain in USD at the acquisition-date and sale-date exchange rates, and any AUD/USD currency gain or loss is part of the calculation.
The Australian main residence exemption does not carry over to the IRS, which applies its own ownership-and-use tests and dollar caps.
Where the systems diverge
- Partial use – if you rented part of the home or used it for business, Australia applies a proportional reduction to the exemption. The US does the same under Section 121, but the allocation method is different.
- Absence rule – Australia allows the exemption for up to six years while the home is rented. The US has no equivalent – if you moved out more than three years before selling, you may fail the Section 121 use test.
- Currency gap – even when the Australian gain is fully exempt, a falling AUD can create a USD-denominated gain that the IRS taxes. A property bought at AUD 500,000 when AUD/USD was 0.90 has a USD cost base of $450,000. If it sells for AUD 700,000 when the rate is 0.65, the USD proceeds are $455,000 – a US gain of $5,000 even though the AUD gain is fully exempt in Australia.
- Foreign residents – the exemption is unavailable for a home disposed of after 30 June 2020, unless the ATO’s life events test is met. The test has two parts. First, you must have been a foreign resident for a continuous period of six years or less when you sold. Second, one of these must have happened during that period: You, your spouse, or your child under 18 had a terminal medical condition; your spouse or child under 18 died; or the sale resulted from a formal agreement, such as a binding financial agreement or a court order, made after your marriage or relationship broke down. Homes bought before 7:30 PM AEST on 9 May 2017 and sold by 30 June 2020 qualified under transitional relief without meeting this test.
Capital gains tax on investment property in Australia for US expats
Selling an Australian investment property triggers CGT event A1 in Australia and a separate US gain on Form 8949, with a different depreciation basis in each system.
In Australia, rental property capital gains are calculated the same way as other assets: proceeds minus cost base, with the 50% discount available to residents holding for over 12 months.
The cost base includes stamp duty, legal costs, and non-deductible capital improvements – but not deductions already claimed for depreciation.
US depreciation recapture
On the US side, an investment property produces rental income reported on Schedule E and, at sale, a capital gain on Form 8949.
The US requires depreciation recapture: the portion of gain attributable to prior depreciation is taxed at up to 25% under Section 1250, not at the preferential long-term rate.
Depreciation mismatch
Australia allows capital works deductions under Division 43 – typically 2.5% of construction cost per year for residential property built after 15 September 1987.
The US requires straight-line depreciation under the Alternative Depreciation System for property used predominantly outside the US. For residential rental property in Australia, the recovery period is 30 years.
The AUD-to-USD conversion adds another layer. The cost base must be converted at the exchange rate on the acquisition date, and each year’s rental income and depreciation at the rates during that year. Sale proceeds are converted at the rate on the disposal date.
US like-kind exchange rules under Section 1031 do not apply to exchanges involving foreign real property. You cannot defer a gain by swapping an Australian property for a US one.
See our TFX guide to foreign property gains for the complete US reporting rules on selling real estate abroad.
Australian non-resident capital gains tax: rules for foreign residents
Non-resident CGT bills are usually higher than a resident’s because two key benefits are unavailable:
- No 50% CGT discount – since 8 May 2012, the discount does not apply to gains accrued during periods of non-residency. Assets acquired before that date may qualify for a partial discount under transitional rules, but only for the holding period before 8 May 2012.
- No main residence exemption – foreign residents who dispose of a home after 30 June 2020 cannot claim this exemption unless they meet the life events test. It applies only if they have been foreign residents for a continuous period of six years or less and a qualifying event occurred in that time. Qualifying events are a terminal medical condition affecting them, their spouse, or their child under 18; the death of their spouse or child under 18; or a formal agreement after a marriage or relationship breaks down, which does not have to be a court order. Transitional relief, which covered homes bought before 9 May 2017, expired on 30 June 2020.
Foreign resident CGT withholding
The withholding rules changed significantly on 1 January 2025. The rate increased from 12.5% to 15% of the sale price, and the previous AUD 750,000 threshold was removed. Every property sale by a foreign resident now triggers withholding, regardless of the sale price.
The buyer or their conveyancer is required to withhold the 15% and remit it to the ATO unless the seller obtains a clearance certificate or a variation.
For US expats who have left Australia, this matters in two ways:
- The 15% withholding is an advance payment of Australian tax – not a final tax. Your actual CGT liability depends on your total Australian-source income for the year, and you may receive a refund or owe more when you file your Australian return.
- The withholding is creditable on your US return through Form 1116, but timing matters. If the Australian tax year and US tax year produce different year-end dates, the credit may fall in a different US tax year than the gain.
Australia’s exit tax on capital gains when you emigrate and unrealised gains
Australia does not tax unrealised capital gains in the strict sense, but CGT event I1 deems most assets to be sold at market value when you cease being an Australian tax resident.
When you leave Australia permanently, CGT event I1 triggers on assets other than taxable Australian property – which remains subject to Australian CGT regardless of residency. You can either:
- Pay tax now – settle the deemed gain in the year you leave.
- Elect to defer – choose to defer the gain until you actually dispose of the asset. The election is made by not including the deemed gain in your departure-year return. If you defer, the gain is calculated at the actual disposal date, and any changes in value after departure are included.
Australia’s exit tax on capital gains at emigration applies only to the deemed disposal under CGT event I1. Real estate and mining rights remain subject to Australian CGT whenever they are sold, regardless of where you live.
US exit tax comparison
CGT event I1 has no equivalent on the US side for most taxpayers. The US does not impose a departure tax on residents who move abroad.
The exception is IRC Section 877A, which applies to covered expatriates who renounce US citizenship or abandon a green card held for at least 8 of the last 15 years.
The mark-to-market regime treats all worldwide assets as sold at fair market value the day before expatriation, with an $890,000 exclusion (2025).
You are a covered expatriate if any of these apply:
- Average annual net income tax above $206,000 (2025)
- Net worth above $2 million
- Cannot certify five years of US tax compliance
Australia’s capital gains tax on shares, managed funds, and crypto
Australian shares and managed investments each carry distinct US reporting obligations beyond the basic Form 8949 requirement. This section covers the PFIC trap for managed funds and the crypto rules.
Australian capital gains tax on shares and managed funds: the PFIC trap
Direct ASX shares are ordinary capital assets. You report the gain on Form 8949, claim the FTC on Form 1116, and move on. The complication is managed funds.
Australian managed funds, unit trusts, and many ETFs are almost always passive foreign investment companies for US tax purposes.
A PFIC is any foreign corporation where 75% or more of income is passive, or 50% or more of assets produce passive income. Direct ASX-listed shares do not trigger PFIC reporting – only pooled investment vehicles do.
Default PFIC treatment and elections
The default PFIC tax treatment is punitive: gains are taxed at the highest ordinary rate plus an interest charge. To avoid this, US expats can elect one of two methods:
- Qualified Electing Fund – requires the fund to provide an annual PFIC information statement. Most Australian funds do not provide this.
- Mark-to-market – recognises unrealised gains annually at fair market value. More practical for Australian funds with readily available pricing, but it converts what would be long-term capital gains into ordinary income.
A PFIC reporting exception applies if the total year-end value of all PFIC holdings is $25,000 or less – or $50,000 for married filing jointly. Below this de minimis threshold, Form 8621 is not required.
The PFIC default method inflates the tax with an interest charge, and the QEF election requires fund-level cooperation that most Australian funds do not offer. Mark-to-market is often the least bad option for US expats holding Australian managed investments.
Capital gains tax on crypto in Australia for US expats
The ATO treats crypto as a CGT asset. Swaps, sales, and spending all count as CGT events, and the 50% discount applies to crypto held over 12 months by Australian residents.
Personal-use crypto acquired for AUD 10,000 or less may be exempt – but the ATO applies this narrowly and will not accept it for assets held as an investment.
Key reporting points
- Every disposal is a CGT event in both jurisdictions. The IRS treats crypto as property, reported on Form 8949.
- The US does not have a personal-use exemption for crypto.
- Crypto trades happen in AUD, and the IRS requires USD reporting – every transaction needs a USD conversion at the trade date.
- The ATO and IRS do not share crypto exchange data automatically, but both have data-matching programs. Report every disposal in both jurisdictions.
US-Australia tax treaty capital gains: Article 13 and the saving clause
The treaty provides limited relief on capital gains because of the saving clause in Article 1, paragraph 3.
The saving clause preserves each country’s right to tax its own citizens and residents as if the treaty did not exist – which means the US can and does tax a US citizen’s worldwide capital gains regardless of what Article 13 says.
Article 13 and Article 21 allocate taxing rights by asset type:
| Asset type | Taxable in Australia? | Taxable in US? | Treaty provision |
|---|---|---|---|
| Australian real property | Yes – Article 13(1) | Yes – saving clause | Both countries tax; FTC resolves |
| Shares in a land-rich entity with more than 50% real property | Yes – Article 13, Alienation of Property, per the IRS technical explanation | Yes – saving clause | Both countries tax; FTC resolves |
| Shares and other assets generally | Yes, if Australian-sourced – Article 21, Income Not Expressly Mentioned, lets the source country tax too, not just the country of residence | Yes – saving clause overrides | Both countries may tax; FTC resolves |
| Business property of a permanent establishment | Country where the PE is situated – Article 21(3), applying Article 7 on business profits, per the IRS technical explanation | Yes – saving clause | Both countries tax; FTC resolves |
Practical effect for US expats in Australia
- Australia taxes gains on Australian-situs assets under its domestic law, and the treaty confirms this.
- The US taxes everything under the saving clause.
- Article 22 directs the US to allow a credit for Australian tax paid, subject to US domestic limitations – which means Form 1116.
The treaty does not eliminate double taxation on capital gains. It provides the framework for the FTC to do that work, and the FTC has its own limitations.
How the IRS taxes Australian capital gains: Form 8949, Schedule D, and tax year 2025 rates
The gain reported to the IRS can differ from the gain reported to the ATO because of the AUD/USD conversion, different cost base calculations, the Australian 50% discount that the IRS ignores, and different depreciation methods.
US citizens report Australian capital gains in US dollars on Form 8949, then transfer the totals to Schedule D of Form 1040.
| Filing status | 0% rate applies up to | 15% rate applies up to | 20% rate above |
|---|---|---|---|
| Single | $48,350 (2025) | $533,400 (2025) | $533,400 (2025) |
| Married filing jointly | $96,700 (2025) | $600,050 (2025) | $600,050 (2025) |
Short-term and special rates
- Short-term gains on assets held one year or less are taxed at ordinary income rates – up to 37% (2025).
- Collectibles – art, antiques, precious metals, wine – held for more than one year are taxed at a maximum federal rate of 28% for tax year 2025. If you held the collectible one year or less, the gain is taxed as ordinary income instead, at rates up to 37% for tax year 2025.
AUD to USD exchange rates and timing differences on capital gains
The IRS measures your gain in US dollars, so changes in the AUD/USD rate between purchase and sale can create or erase a taxable gain.
Convert the cost basis at the exchange rate on the acquisition date and the proceeds at the rate on the disposal date. The Federal Reserve’s daily rates or the Treasury reporting rate are acceptable sources.
The Australian tax year – July 1 to June 30 – and the US tax year – January 1 to December 31 – do not align. A gain recognised in May 2026 falls in the Australian 2025–26 tax year and the US 2026 tax year.
If you pay Australian tax on that gain before you file your US return for 2026, claiming the credit on Form 1116 works as expected. If the Australian tax is not finalised until after the US filing deadline, you may need to amend or use the accrued-tax method on Form 1116.
A flat AUD gain can still produce a USD gain or loss depending on the direction of the exchange rate. This is not a rounding issue – it can be substantial on large transactions.
Net investment income tax on Australian capital gains
US citizens abroad owe the 3.8% Net Investment Income Tax when modified adjusted gross income exceeds $200,000 single or $250,000 married filing jointly (2025). Capital gains from Australian assets count as net investment income.
The NIIT is calculated on Form 8960 and cannot generally be offset by the foreign tax credit.
The IRS has held that the FTC under Section 901 does not apply to the NIIT because it is imposed under Section 1411, not Section 1. Treaty-based foreign tax credit claims against the NIIT have not succeeded in court. The US Court of Appeals for the Federal Circuit rejected one in August 2026, following the Tax Court’s 2021 decision in the same direction.
Why the NIIT hits expats hard on property sales
The NIIT adds a 3.8% layer on top of the regular capital gains rate. Combined with state tax if applicable, the effective US rate can approach 23.8% – and the FTC generally offsets only the regular tax, not the NIIT.
Reporting Australian assets: FBAR (FinCEN 114) and Form 8938 thresholds
FBAR – FinCEN Form 114 is required when aggregate foreign financial accounts exceed $10,000 at any point in the year. The deadline is April 15, with an automatic extension to October 15.
Form 8938 for expats living abroad applies at $200,000 year-end or $300,000 at any time during the year for single filers, and $400,000 / $600,000 for joint filers.
Selling an Australian asset can push your Australian bank balance over the $10,000 FBAR threshold even if you owed no tax. Sale proceeds held in an Australian bank account – even temporarily – count toward the FBAR aggregate.
What to report
Australian accounts that must be reported on FBAR and Form 8938 include savings accounts, checking accounts, term deposits, superannuation accounts – determined during preparation – brokerage accounts, insurance policies with cash value, and business accounts where you own more than 50%.
Real estate, precious metals, collectibles, and accounts at a US branch of a foreign institution are not reportable on FBAR.
Self-managed super funds
For self-managed super funds – SMSFs – the IRS treats the fund as a foreign grantor trust, requiring annual reporting on Forms 3520 and 3520-A. If the SMSF holds managed investments, those investments may be PFICs requiring separate Form 8621 reporting.
Gifts and inheritances
Gifts and inheritances above $100,000 received from a non-resident alien individual or a foreign estate must be reported on Form 3520.
This is a reporting requirement – the gift itself is generally not taxed, but failure to report carries a penalty of 5% per month, capped at 25%.
FBAR penalties
The non-willful FBAR penalty is up to $16,536 per report (2025). The willful penalty is the greater of $165,353 (2025) or 50% of the account balance.
Australia capital gains tax deemed disposition at death, inheritance, and gifts
Australia generally has no deemed sale at death, except when an asset passes to a foreign-resident beneficiary – and US heirs of an Australian estate get a stepped-up US basis that can erase most of the US gain.
When an Australian resident dies and leaves an asset to an Australian-resident beneficiary, the beneficiary generally takes over the original cost base – there is no deemed disposal and no CGT event at death. The CGT liability transfers to the beneficiary, who realises the gain when they eventually sell.
Per the ATO’s inherited asset rules, the outcome is different if the beneficiary is a foreign resident, as a US-based heir generally is, and the asset is not taxable Australian property in their hands.
CGT then applies to the deceased instead: the gain is worked out using the asset’s market value at the date of death and reported on the deceased’s final Australian tax return.
US stepped-up basis
The US treats inherited assets differently. Under IRC Section 1014, the cost basis of inherited property is stepped up – or down – to fair market value at the date of death.
A US citizen who inherits an Australian property may have little or no US-taxable gain if they sell soon after inheriting, even though the Australian cost base remains the original purchase price.
This mismatch can work in the expat’s favour on Australian real estate, which is taxable Australian property: no Australian tax at death, and a stepped-up US basis that reduces or eliminates the US gain at sale.
Foreign gift and inheritance reporting
For foreign gifts and inheritances above $100,000 from a non-resident alien individual or foreign estate, Form 3520 reporting is required.
The threshold for gifts from a foreign corporation or partnership is $20,116 (2025).
Australia’s deemed-disposal rules at death are narrower than the US exit tax, but they are not absent.
An asset passing to a foreign-resident beneficiary is treated as sold at market value on the deceased’s final return, unless it is taxable Australian property in the beneficiary’s hands. Otherwise, the gain carries over to the beneficiary and is taxed when they eventually sell.
How to avoid or reduce capital gains tax in Australia: rollover relief and planning examples
Australian rollover relief defers CGT, but the IRS often does not recognise the deferral, so check the US treatment before relying on it.
Use Australian rollover relief
Australia offers several rollovers that defer CGT. The most common:
| Rollover type | How it works | US treatment |
|---|---|---|
| Marriage or relationship breakdown | Transfer of assets between spouses under a court order or binding financial agreement – CGT deferred until the receiving spouse sells | IRS recognises tax-free transfers between spouses under IRC Section 1041 |
| Small business rollover | Active asset sale proceeds reinvested in a replacement asset within two years – CGT deferred | No direct US equivalent; gain may be taxable on Form 8949 in the year of sale |
| Scrip-for-scrip | Shares exchanged in a qualifying corporate restructure – CGT deferred until new shares sold | May qualify as a tax-free reorganisation under IRC Section 368 if the restructure meets US requirements |
| Compulsory acquisition | Government acquires your asset – CGT deferred if replacement asset acquired within one to two years | May qualify for involuntary conversion deferral under IRC Section 1033 |
| Holding assets 12+ months | 50% CGT discount for residents – not a rollover but the single largest reduction | IRS ignores the discount; applies its own 0/15/20% long-term rates |
Apply other strategies to reduce CGT
- Offset capital losses – Australian capital losses can only offset capital gains, not ordinary income. Unused losses carry forward indefinitely. US net capital losses can offset up to $3,000 of ordinary income per year – $1,500 if married filing separately – with the remainder carried forward.
- Timing sales across tax years – splitting a large gain between two Australian tax years can keep you in a lower marginal bracket. On the US side, the different year-end may let you spread the gain differently.
- Small business concessions – the 15-year exemption, retirement exemption, and 50% active asset reduction are powerful for qualifying businesses but have no US equivalent.
- Section 121 for your home – the $250,000 / $500,000 exclusion applies to a home anywhere in the world, provided you meet the ownership and use tests.
US like-kind exchange rules do not apply to foreign property.
Some Australian deferrals have US equivalents – but many do not. Check both sides before assuming a deferral will survive the cross-border translation.
Frequently asked questions
Yes. Australia taxes capital gains as part of ordinary income – there is no separate CGT rate. The net capital gain is added to your assessable income and taxed at your marginal rate. Residents who hold an asset for at least 12 months qualify for a 50% discount.
It is the tax on the profit from disposing of a CGT asset – shares, property, crypto, or other investments. The gain is calculated as proceeds minus cost base, with discounts and exemptions available depending on residency and holding period.
The net capital gain is included in your assessable income for the Australian tax year – July 1 to June 30 – and taxed at your marginal rate.
Residents who held the asset for over 12 months apply the 50% discount first. Foreign residents pay at marginal rates with no tax-free threshold and no discount on gains accrued after 8 May 2012.
It depends on your total taxable income. An Australian resident in the 30% marginal bracket for 2025–26 who sells an asset held over 12 months pays an effective rate of about 15% after the 50% discount. A foreign resident taxed at 30% pays 30% on the full gain – no discount.
On paper, yes – both Australia and the US tax the gain. In practice, the foreign tax credit on Form 1116 usually eliminates or reduces the double hit. Any excess credit can be carried back one year or forward 10 years.
Yes. The $250,000 single / $500,000 MFJ exclusion applies to a home anywhere in the world, provided you owned and lived in it for at least two of the five years before the sale. The Australian main residence exemption is a separate test.
If the total year-end value of all your PFIC holdings is $25,000 or less – or $50,000 for married filing jointly – Form 8621 is not required. Above that threshold, you must file Form 8621 for each PFIC.
Generally no, with one key exception. If the beneficiary is a foreign resident, which includes most US-based heirs, and the asset is not taxable Australian property, CGT applies to the deceased based on market value on the date of death.
When the beneficiary is an Australian resident or the asset is taxable Australian property, the beneficiary inherits the original cost base and realises the gain only when they sell. The US gives inherited assets a stepped-up basis under IRC Section 1014.
Generally yes. Superannuation accounts are foreign financial accounts and must be included in the FBAR aggregate if total foreign accounts exceed $10,000 at any point during the year. SMSFs have additional reporting as foreign grantor trusts on Forms 3520 and 3520-A.
CGT event I1 treats most assets as sold at market value on the date you cease residency. You can pay tax on the deemed gain immediately or elect to defer. Australian real property remains subject to CGT whenever it is sold, regardless of where you live.
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