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Capital gain tax on shares for new migrant

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I bought some shares a few years before moving to Australia and becoming a permanent resident. Let say I bought the share at a price of $8 and when I became Australian permanent resident, the share price went down to $2. Now, I'm going to sell it at a price of $6. Is it true that I still have to pay CGT as the share price went up from $2 to $6 after I've become a PR, even though I actually made a loss (going down from $8 to $6) over the years?

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Hi @ymgerman,

 

Welcome to our Community!

 

Yes, this is correct. When you become an Australian resident for income tax purposes, (but not a temporary resident, see Temporary residents) you are taken for CGT purposes to have acquired any assets at the time you became a resident for their market value at that time. (Note that having a permanent resident visa for immigration purposes doesn’t necessarily make you an Australian resident for tax purposes.)

 

For CGT purposes, the first element of the cost base or reduced cost base of the asset (at the time you became an Australian resident) is its market value at that time. It can be the case that where there are significant changes in values of assets before and after this time, that the capital gain or loss calculated under CGT rules will not necessarily reflect your actual gain or loss.

 

Using the information from your example, the first element of the cost base for each share will be $2.00, being the market value of each share when you became an Australian resident. You will make a capital gain of $4.00 for each share, being the difference between the sale proceeds of each share and its cost base.

 

The 50% CGT discount can apply where you have held the asset for more than twelve months after becoming a resident before selling it.

 

Hope this helps, JodieH.

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Hi @ymgerman,

 

Welcome to our Community!

 

Yes, this is correct. When you become an Australian resident for income tax purposes, (but not a temporary resident, see Temporary residents) you are taken for CGT purposes to have acquired any assets at the time you became a resident for their market value at that time. (Note that having a permanent resident visa for immigration purposes doesn’t necessarily make you an Australian resident for tax purposes.)

 

For CGT purposes, the first element of the cost base or reduced cost base of the asset (at the time you became an Australian resident) is its market value at that time. It can be the case that where there are significant changes in values of assets before and after this time, that the capital gain or loss calculated under CGT rules will not necessarily reflect your actual gain or loss.

 

Using the information from your example, the first element of the cost base for each share will be $2.00, being the market value of each share when you became an Australian resident. You will make a capital gain of $4.00 for each share, being the difference between the sale proceeds of each share and its cost base.

 

The 50% CGT discount can apply where you have held the asset for more than twelve months after becoming a resident before selling it.

 

Hope this helps, JodieH.