Capital gains tax exemptions for Australian expats who want to sell their homes may no longer be available after June 30, 2020.
The government is pushing ahead with the changes to capital gains tax (CGT) on main residences, announcing a deadline for sales for Australians who live and work overseas if they want to avoid what real estate and expat groups have been calling a tax slug.
Budget papers show the change is worth $581 million and will affect up to 100,000 people. For decades, Australians living abroad have had no problems claiming CGT exemptions on the family home. But the federal government’s plan may soon change that.
No More Capital Gains Tax Exemptions
If the proposed changes will go ahead, if you live and work abroad and you sell your house, no matter how long you’ve owned it or how long you’ve lived in it, you can no longer expect any capital gains tax exemptions from the government.
The change, which was shelved before the election and thought never to surface again, was introduced again as redrafted legislation by the Assistant Treasurer Michael Sukkar.
Mr. Sukkar said the bill will not affect Australian tax residents. As for foreign residents, if the bill is passed, they will just have to make a big decision between now until June 30 of next year.
Excluded Foreign Residents
The proposed change provides for certain exclusions. Foreign residents who acquired their homes in Australia from May 9, 2017, will not be eligible for main residence capital gains tax unless they have been overseas for no more than six years continuous and the capital gains tax event occurs at a time of a “life event” or junctures like terminal illness, death and marriage, or relationship breakdowns. In such cases, capital gains tax will not be denied.
The Capital Gains Tax Exemption Change Was Retrospective
Tax watchers called the change a retrospective denial of the exemption that dates as far back as when the capital gains tax commenced in September 1985.
It was described as unfair especially since it does not recognise the period an expat lived in his home as his main residence. Instead, the tax treatment will be based on the residency status at the time the property was sold and not their use of the property or residency status throughout the period of property ownership.
To determine the capital gain, expats will have to calculate the cost base back to when they first acquired the property. And because capital gains for the main residence is not taxable, this may prove to be problematic as taxpayers may have already disposed of their home’s tax records.
The capital gains tax is anywhere up to 45 per cent depending on the individual’s income.
The potential changes in the capital gains tax exemptions may also negatively impact the property market, particularly since it’s still in the early stages of recovery.
Need property tax accountants in Perth? Contact a Chan & Naylor accounting specialist here.
Aside from property tax assistance, have a look at our other accounting and advisory services designed to help you achieve greater financial success.
If you like this post, “No More Property Capital Gains Tax Exemptions for Expats?,” subscribe to our newsletter and stay in touch with us by liking our main Chan & Naylor Facebook page, as well as our Linkedin, Instagram, and Twitter pages.
The Chan & Naylor Group has national offices in South West Sydney, Sydney, Pymble and Parramatta in New South Wales, Wheelers Hill, Melbourne, Moonee Ponds and Hawthorn in Victoria, Brisbane and Capalaba in Queensland, and East Perth in Western Australia that can assist you with your accounting needs. Contact us here today.