Changes to the CGT 50% Discount

The government introduced changes to the capital gains tax (CGT) discount, previously known as the ‘CGT 50% discount’. In the 2012–2013 Budget, the government announced changes to the application of the CGT discount. These changes became law on 29 June 2013.

Individuals, including beneficiaries of a trust and partners in a partnership, may no longer be entitled to receive the full CGT discount on a capital gain received after 8 May 2012 if they are:

• foreign or temporary residents; or
• australian residents with a period of foreign residency.

From 8 May 2012, foreign or temporary resident individuals must meet certain eligibility conditions to apply the CGT discount.

For CGT events occurring after 8 May 2012, the application of a CGT discount percentage will depend on:

• whether the CGT asset was held before or after 8 May 2012, and
• the residency status of the individual who has the capital gain.

You are not affected by this change if the CGT event occurred before 8 May 2012.

HOW DO THE CHANGES AFFECT FOREIGN OR TEMPORARY RESIDENTS?

You must calculate the CGT discount you can apply to the capital gain if you are a foreign or temporary resident individual and, after 8 May 2012, you have a discount capital gain from a CGT event.

If you were a foreign or temporary resident on 8 May 2012, you may wish to get a market value for the CGT asset as at 8 May 2012 and use a market value calculation. This will apportion the CGT discount to take into account the capital gain you have that was accrued before 8 May 2012.

HOW DO THE CHANGES AFFECT AUSTRALIAN RESIDENTS?

You must calculate the CGT discount you can apply to the capital gain you have if you are an Australian resident and, after 8 May 2012, you have:

• a capital gain from a CGT event, and
• a period of foreign or temporary residency.

The period of foreign or temporary residency after 8 May 2012 is taken into account when calculating the CGT discount you can apply to your capital gain.