{"id":8328,"date":"2026-06-10T07:20:56","date_gmt":"2026-06-10T07:20:56","guid":{"rendered":"https:\/\/csttax.com\/en-au\/?p=8328"},"modified":"2026-06-16T01:22:36","modified_gmt":"2026-06-16T01:22:36","slug":"australian-budget-2026-impact-of-the-30-capital-gains-tax-cgt-on-expats","status":"publish","type":"post","link":"https:\/\/csttax.com\/en-au\/blog\/australian-budget-2026-impact-of-the-30-capital-gains-tax-cgt-on-expats\/","title":{"rendered":"Australian Budget 2026: Impact Of The 30% Capital Gains Tax (CGT) On Expats"},"content":{"rendered":"\n

The Effect Of The 30% Capital Gains Tax Minimum Floor Tax On Australian Expats And Non-Residents<\/strong><\/h2>\n\n\n\n

Following the announcements in the 2026 Australian budget provided by Treasurer Jim Chalmers on 12 May 2026, Matthew Marcarian, Principal of our Sydney office, examines the distortive consequences of the proposed 30% Capital Gains Tax (CGT) minimum floor tax on Australian expats and other non-residents in this article. <\/em><\/p>\n\n\n\n

The benefit of negative gearing was supposed to be preserved for residential properties acquired prior to 7.30pm on 12 May 2026 (Budget Night) and was to be permitted for new residential properties acquired after Budget Night. <\/p>\n\n\n\n

However, because of the proposed Floor Tax on capital gains – negative gearing benefits are not necessarily preserved. <\/p>\n\n\n\n

Unfortunately – this is true for Australian tax residents in various situations and is also true for Australian expats alike (non-residents).<\/p>\n\n\n\n

The Case Study below illustrates the problem in the circumstances of an Australian expat \u201cLiam\u201d who decides to sell his Australian rental property. <\/p>\n\n\n\n

It demonstrates that the floor tax formula removes (effectively retrospectively) the value of accumulated prior-year rental tax losses. Current policy settings do not allow tax losses to be kept in abeyance. They must be applied to taxable income.<\/p>\n\n\n\n

The Policy Flaw: Removing The Benefit Of Prior-Year Tax Losses<\/strong><\/h3>\n\n\n\n

For individuals working overseas, their assessable Australian income is typically restricted strictly to Australian-sourced rental income. <\/p>\n\n\n\n

Under long-standing Australian tax principles, legitimate out-of-pocket investment losses incurred while property gearing can be carried forward indefinitely to offset future assessable income, including capital gains. <\/p>\n\n\n\n

The 30% minimum floor tax formula completely changes this.<\/p>\n\n\n\n

While prior-year revenue tax losses are technically “used” on paper to reduce Liam\u2019s nominal taxable income, the 7-step legislative formula in the proposed Section 119-10(2) forces a top-up calculation that anchors Liam\u2019s final bill to a flat 30% of the gross capital gain. The 30% floor CGT claws back the tax savings otherwise available and removes the tax benefit of the tax losses. <\/p>\n\n\n\n

The benefit of negative gearing on residential property acquired prior to 7.30pm on Budget night was supposed to be preserved. <\/p>\n\n\n\n

Analysis: “Liam’s Case”<\/strong><\/h3>\n\n\n\n

Liam is an Australian expat working overseas. Over 4 years of non-residency, he has accumulated $80,000 in carried-forward Australian tax losses on his investment apartment. <\/p>\n\n\n\n

The tax losses arose because his rental expenses, including bank interest, exceeded his rental income by $20,000 each year. Liam sells his property for a capital gain of $250,000 in preparation for buying a home upon returning to Australia. As a non-resident, he has now other Australian assessable income.<\/p>\n\n\n\n

Liam’s Parameters: Carried-Forward Rental Losses: $80,000 | Net Capital Gain: $250,000. Actual Taxable Income (Post-Loss): $170,000. <\/p>\n\n\n\n

Scenario A shows the result if Liam had no accumulated tax losses. <\/p>\n\n\n\n

Scenario B shows the result with losses applied.  <\/p>\n\n\n\n

Legislative Calculation Steps<\/strong><\/td>Scenario A: WITHOUT Accumulated Loss Baseline ($250k Taxable)<\/strong><\/td>Scenario B: WITH $80,000 Accumulated Loss Applied ($170k Taxable)<\/strong><\/td><\/tr>
Step 1: Capital Gain \u00d7 30%<\/strong><\/td>$250,000 \u00d7 30% = $75,000<\/td>$250,000 \u00d7 30% = $75,000<\/td><\/tr>
Step 2: Basic Income Tax Liability<\/strong><\/td>Foreign Resident Tax on $250k = $87,850<\/td>Foreign Resident Tax on $170k = $53,450<\/td><\/tr>
Step 3: Tax if Taxable Income reduced by CG<\/strong><\/td>Tax on ($250k – $250k) = Tax on $0 = $0<\/td>Tax on ($170k – $250k) = Tax on $0 = $0<\/td><\/tr>
Step 4: Subtract Step 3 from Step 2<\/strong><\/td>$87,850 – $0 = $87,850<\/td>$53,450 – $0 = $53,450<\/td><\/tr>
Step 5: Subtract Step 4 from Step 1<\/strong><\/td>$75,000 – $87,850 = -$12,850<\/td>$75,000 – $53,450 = $21,550<\/td><\/tr>
Step 6 & 7: Minimum Tax Gap Amount<\/strong><\/td>$0 (Result was below nil)<\/td>$21,550<\/td><\/tr>
Add: Medicare Levy (Foreign Resident Rate)*<\/strong><\/td>$0 (Exempt as Non-Resident)<\/td>$0 (Exempt as Non-Resident)<\/td><\/tr>
Total Out-of-Pocket Tax Bill (Step 2 + Step 7)<\/strong><\/td>$87,850<\/strong><\/td>$75,000 (Floor overrides basic tax calculation)<\/strong><\/td><\/tr>
Effective Cash Value of the $80,000 Loss: $87,850 – $75,000 = $12,850 total net savings (vs. $34,400 standard progressive savings. 62.6% of the tax loss value is lost).<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Liam’s simulation is based strictly on the legislated 2026 Stage 3 foreign resident income tax brackets (30% from $0 to $135,000; 37% from $135,001 to $190,000; 45% above $190,000). Foreign residents are legally exempt from the 2.0% Medicare Levy and the Medicare Levy Surcharge.<\/em><\/p>\n\n\n\n

Core Technical Anomalies For Expats And Non-Residents<\/strong><\/h3>\n\n\n\n