Selling property in the UK or Australia while a tax resident of either country presents complex tax issues, double taxation risks, and strict compliance requirements. Overlooking key tax obligations can lead to substantial financial consequences, unnecessary tax payments, and significant penalties.
Many sellers assume they can navigate these waters alone, missing out on valuable reliefs and structuring opportunities that could minimise their tax exposure. Engaging a specialist cross-border tax advisor is not just beneficial – it’s essential.
At Nexia Australia, we specialize in UK & Australian cross-border property taxation. Our expertise ensures you don’t just comply with the law but also optimize your tax position.
Below, we explore the most common tax traps when selling UK or Australian property while a tax resident of either country.
1. Selling Property? You may owe tax in both countries
Many sellers assume they only owe tax in the country where the property is located, but your tax residency status also determines where you are liable for CGT.
- If you are an Australian tax resident selling UK property, you may be taxed in both Australia and the UK. The same applies for UK tax residents who are selling UK property.
- The UK-Australia Double Tax Agreement (DTA) can help avoid double taxation, but navigating it requires careful planning.
- Foreign tax credits may be available to reduce your overall liability, but improper structuring could leave you paying more tax than necessary.
Without cross-border tax expertise, you could be caught in a costly tax trap.
2. UK Tax Relief – Private Residence Relief (PRR) – More generous than you think
Many UK property sellers fail to maximize PRR, often overlooking generous deemed occupation reliefs that could significantly reduce their Capital Gains Tax (CGT) liability.
- PRR only applies for periods when the property was your main residence, which includes periods of actual and deemed occupation.
- UK tax law provides valuable deemed occupation reliefs that allow sellers to claim PRR for certain periods of absence from their property.
- Many sellers assume that only actual occupation qualifies, leading them to unnecessarily pay CGT on a sale that could have been partially or fully exempt.
Engaging our specialist cross-border tax advisory team ensures that all applicable reliefs are identified and claimed, helping reduce or eliminate CGT that might otherwise be unnecessarily paid.
3. The main residence exemption no longer applies for many Australian expats (Australian property sellers)
Since 2019, many non-residents of Australia selling their former Australian home no longer qualify for the main residence exemption.
- Many expats expect their home sale to be tax-free, only to discover that they are no longer eligible for the main residence exemption once they leave Australia.
- Returning to Australia and re-establishing Australian tax residency before selling may restore the main residence exemption, but timing is crucial.
- Poor planning could result in substantial amount of unnecessary capital gains tax.
Our specialist cross-border tax advisory team can assess whether timing your sale differently could save you a significant tax liability.
4. UK CGT Reporting – 60 days to avoid penalties
Sellers of UK residential property must file a Capital Gains Tax (CGT) return within 60 days of completion – a rule that many overlook.
- For non-residents of the UK, this applies even if no tax is due on the sale.
- Late filings incur penalties and interest, which can escalate quickly.
- Many solicitors and estate agents fail to inform sellers of this crucial requirement.
Our team can assist in the filing of your UK CGT return, avoiding unnecessary fines and ensuring accurate reporting.
5. Foreign Resident Capital Gains Withholding (FRCGW) – A costly oversight (Australian sellers)
Recent changes to Foreign Resident Capital Gains Withholding (FRCGW) rules now make compliance even more critical for sellers of Australian property who are foreign residents.
- From 1 January 2025, the withholding rate increased from 12.5% to 15%.
- The AUD$750,000 property value threshold has now been removed, meaning all Australian property sales by foreign residents will be subject to FRCGW rules.
- Even Australian citizens living abroad may be affected, as the ATO applies withholding based on residency status.
- Sellers who fail to apply for a clearance or variation certificate will have 15% of their sale price automatically withheld by the purchaser, even if no tax is ultimately due.
Our specialist advisory team can review your eligibility to apply for a clearance certificate or a variation certificate, ensuring the purchaser does not unnecessarily withhold FRCGW.
6. Hidden currency exchange gains – Unexpected tax bills
If your property’s sale price differs from the original purchase price due to currency fluctuations, you could owe tax on a gain you never actually received.
- CGT calculations factor in exchange rates at purchase and sale, not just property value.
- Many sellers ignore this risk, only to be hit with an unexpected tax bill.
Our team can identify currency-related tax risks before they become expensive problems.
Next steps
Selling property in the UK or Australia comes with complex tax rules, strict deadlines, and potential double taxation risks. Without the right tax strategy, you could overpay tax or miss out on valuable reliefs.
At Nexia, our cross-border tax specialists ensure you maximize exemptions, stay compliant, and structure your sale efficiently.
Before you sell, get expert advice to avoid costly mistakes. Contact your Nexia Advisor today.
