Foreign Residents Removal Of The CGT Main Residence Exemption
WHAT ARE THE CHANGES?
The Capital Gains Tax (CGT) main residence exemption for foreign residents has been removed with effect from on 9 May 2017. However, there are some limited exceptions.
WHAT TO DO?
There is a short window for existing property owners to sell their property and obtain the main residence exemption under the pre-existing rules. For properties held prior to 9 May 2017, the proposed rules will not apply to a disposal of the property until after 30 June 2020.
Therefore, if an individual does not intend on returning to Australia as a tax resident in the foreseeable future and is looking to dispose of the property there is a narrow window where the exemption may still be available.
The potential tax implications of selling the property after the 30 June 2020 deadline needs to be considered. Foreign residents should consider whether entering into a contract for sale of the property prior to this deadline or continuing to hold the property indefinitely to save tax liability based on their own investment plans.
WHAT ARE THE IMPACTS?
- Foreign residents may consider selling their main residence urgently before 30 June 2020 to be qualified for the main exemption (contact date would need to be by 30 June 2020).
- For sales entered into after 30 June 2020, no apportionment for periods of residency during the ownership period will be available regardless of the term residency or principal place of residence period.
Should you need assistance in determining what the tax implications of a sale prior to 30 June 2020 versus post 30 June 2020 please contact us to speak to a specialist.