Many new migrants to Australia own property overseas. But did you know that the way you report capital gains and losses on those foreign properties can significantly affect your Australian tax bill?
Let’s take the real-life example of Jacques and Monique, a French couple in their 40s who moved to Australia in 2021. After settling in Sydney and making it their permanent home, they decided in 2024 to sell their original home in France—a property they had bought back in 2010 for AUD $1 million.
The couple sold the French home for $1.5 million in 2024, which was less than its market value of $1.8 million when they migrated to Australia, but still much higher than what they originally paid. Naturally, they were confused—did they make a gain or a loss?
That’s where tax strategy comes into play.
The Hidden Rule That Helped Them Claim a $300,000 Capital Loss
Under Australian tax law, once you become a tax resident, any overseas property is treated as if you “acquired” it at the market value on the day you became a resident—not the original price you paid.
In Jacques and Monique’s case:
- Original purchase in 2010: $1 million
- Value at the time of migration in 2021: $1.8 million
- Sale price in 2024: $1.5 million
So, for Australian tax purposes, they made a $300,000 capital loss—even though globally they still came out ahead. Thanks to this special rule in the tax legislation (Section 855-45 of the Income Tax Assessment Act 1997), migrants aren’t taxed on gains made before they arrived in Australia.
What Happens to the $300,000 Loss?
Although they didn’t have any other capital gains in 2024–25 to offset the loss, Jacques and Monique can carry the capital loss forward indefinitely to offset future capital gains—like if they sell shares or investment properties in Australia later on.
It’s important to note that capital losses can only reduce capital gains, not income like salary or rental profits. But with good planning, these losses can be used strategically to minimise tax in future years.
Why the Right Valuation—and the Right Advice—Matters
One critical step in this process was the professional property valuation Jacques and Monique arranged in 2021, the day they became tax residents. Without this document, they may have lost the opportunity to claim the capital loss at all.
This is where specialist advice makes all the difference.
At Boa & Co. Chartered Accountants, we help new migrants and overseas investors navigate complex Australian tax rules around foreign property, capital gains, and main residence exemptions. Whether you’re selling overseas property, migrating to Australia, or holding foreign assets, the earlier you get advice, the better your outcome will be.
Thinking of Selling Overseas Property? Don’t Miss Valuable Tax Opportunities
If you, like Jacques and Monique, have overseas assets and are unsure how they impact your Australian tax obligations, speak to our team today. We can help you determine the right timing, obtain the proper documentation, and make sure your tax return reflects every possible benefit the law allows.
Let Boa & Co. Chartered Accountants be your trusted partner in managing cross-border tax matters. To get tailored advice before the 30 June tax deadline, contact us on 1300 952 286, email [email protected], or visit www.boanco.com.au.