CGT main residence exemption eliminated for expats

In a blow to Australian expats around the world, a new law denying the main residence exemption to Australians living overseas was passed into law last week.

The new rules will increase the exposure of non-residents to Capital Gains Tax (CGT) should they dispose of property interests, except under limited circumstances.

The Australian parliament passed the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 on December 5 after first announcing the move in the 2017-18 budget.

The law change was criticised heavily at the time for being retrospective, given it would expose properties to CGT purchased more than 30 years ago.

While the rules were primarily targeted at foreign residents, they will have the same impact on Australian expatriates living abroad.

Properties acquired before 9 May 2017 will still be entitled to the exemption until 30 June 2020.

Any property sales completed after 30 June 2020 will be subject to CGT unless individuals, who have been non-residents for less than six years, have experienced significant life events including:

• The taxpayer, their spouse, or child under 18 years of age, had a terminal medical condition
• The taxpayer’s spouse or child who was under 18 years of age has died
• The CGT event involved the distribution of assets between the taxpayer and their spouse as a result of divorce, separation or similar maintenance agreements.

Speak to the tax experts

Residency provisions are a complex area of law, so foreign property owners and expatriates should consider getting personalised tax advice suitable to their circumstances.

Employers of expatriates should also take note of the changes.

Employees may be less willing to take up overseas appointments if they risk losing their main residence exemption, in the event they decide to sell their home while living abroad.

LDB Group’s highly experienced team of accounting, finance and business experts can develop a solution tailored for you.

To find out how LDB can help, please call (03) 9875 2900 or fill out the contact form below and we’ll be in touch.