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FIRPTA for Australian Sellers: Selling Your US Property

When an Australian sells US property, both the IRS and the ATO want their share. FIRPTA withholding is collected at the US closing: 15% of the full sale price. The ATO taxes the same gain on the Australian tax return — but with a key advantage unavailable to most: the 50% CGT discount for Australian tax residents on assets held more than 12 months. This discount cuts the Australian-taxable portion of the gain in half before rates are applied, significantly reducing the Australian tax bill on a long-held US property.

FIRPTA Withholding for Australian Sellers

Standard FIRPTA rules apply: 15% of gross sale price withheld by the buyer at closing. Example: An Australian sells a California investment property for $800,000 purchased for $500,000. Gain: $300,000. FIRPTA withholds 15% of $800,000 = $120,000. Actual US capital gains tax at 15% (long-term) on $300,000: $45,000. Without certificate: $120,000 escrowed, $75,000 refunded via annual return. With Form 8288-B certificate: $45,000 withheld, $75,000 released at closing. Apply for the certificate as soon as the property lists. Full guide: FIRPTA complete guide.

The Australian CGT: The 50% Discount Advantage

Australian tax residents selling overseas property report the gain on their Australian tax return. (1) The 50% CGT discount: for assets held more than 12 months, Australian tax residents are entitled to a 50% discount on the capital gain before calculating tax. On a $300,000 USD gain (converted to AUD at transaction date rates): if the AUD gain is approximately $460,000, only $230,000 (50%) is included in taxable income. (2) The foreign tax credit: US capital gains tax paid is credited against the Australian tax on the same gain. The combination of the 50% discount and the US tax credit often means the Australian CGT bill after credits is modest. (3) Note for non-residents: Australians who have become non-residents of Australia for tax purposes do not receive the 50% CGT discount on post-residency gains. Residency status at the time of sale matters.

Repatriating Proceeds to Australia

After the US closing, net USD proceeds can be returned to Australia: (1) Currency conversion: use a specialist AUD/USD currency broker rather than an Australian bank for 2–4% better exchange rates. On AUD $500,000 equivalent, this saves AUD $10,000–$20,000. (2) No Australian capital controls: Australia has no restrictions on Australians repatriating overseas investment proceeds. The conversion and transfer are straightforward. (3) ATO reporting: the sale and gain are reported on the Australian individual tax return for the year in which settlement occurs. Work with an Australian accountant with overseas property experience.

Australian Buyer Guides: US Mortgage — How Long Can I Stay? — FIRPTA Guide — AUD/USD Currency — Find an Agent

Frequently Asked Questions

What is FIRPTA for Australian sellers?

A US withholding requirement: buyer withholds 15% of gross sale price from Australian seller proceeds at closing. Form 8288-B certificate filed before closing reduces this to actual capital gains tax on the gain.

Does Australia also tax the gain when an Australian sells US property?

Yes, if the seller is an Australian tax resident. But the 50% CGT discount applies for assets held 12+ months — halving the taxable Australian gain. US taxes paid are credited against Australian CGT through the DTA.

What is the 50% Australian CGT discount and does it apply to US property?

Australian tax residents receive a 50% discount on capital gains from assets held more than 12 months. This halves the gain included in taxable income before Australian rates are applied. It applies to overseas property including US real estate, for Australian tax residents.

Can Australians bring their US property sale proceeds back to Australia?

Yes. No Australian capital controls restrict repatriation of overseas investment proceeds. Use a specialist currency broker for AUD/USD conversion — 2-4% better than an Australian bank.