Australian Expat Alert – Budget announces main residence CGT changes

Matthew Marcarian   |   24 May 2017   |   2 min read

Background

Many Australian citizens who leave Australia and become non-residents (i.e foreign residents for tax purposes) rent their former main residence while they are living overseas.

Presently these Australian citizens are able to benefit from a CGT main residence exemption under the ‘6 year absence’ concession (Section 118-145 of the ITAA 1997).  In essence the absence rule means that a person can move out of their main residence, rent it out, and then move back into it before the end of 6 years and the property will retain its 100% CGT free status when it is sold.
Further, where a former main residence is not rented out at all – the property can remain exempt from CGT indefinitely (See Section 118-145(3)).
CST has many expat clients who have moved overseas and who are renting out their family homes.

New Budget Announcement

On the 9 May 2017 the Treasurer announced that the Government “would stop foreign and temporary residents from claiming the main residence capital gains tax exemption when they sell property in Australia from Budget night”. The a transitional rule is to be provided so that people who own such property on 9 May 2017 can sell by 30 June 2019 without paying capital gains tax.

However the announcement was included in a series of measures aimed at improving the integrity of Australia’s CGT rules for foreign investors.
Naturally enough, most Australian expats living abroad would not consider themselves to be ‘foreigners’ and the loss of a CGT exemption on their former main residence would be a very bad outcome.
Unfortunately it is not yet clear whether this announcement was actually intended to apply to foreign residents (meaning foreign tax residents, which would include Australian citizens who are non-resident of Australia) or whether the announcement is intended to apply to foreign nationals only.

Given the lack of detail in the announcement we will have to wait until legislation is introduced before being sure of the Governments intentions in this area. If you are an Australian expat living abroad please do not hesitate to contact us to discuss any concerns you may have or if you require advice.

Please see – http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_16.htm

NEED ASSISTANCE FOR YOUR SITUATION?

Contact us today
Contact Us
By providing us your information you agree to our privacy policy

More articles like this

 

Potential Changes To Australia’s Personal Tax Residency Laws


16th Mar 2022
Matthew Marcarian

On 11 May 2021, the Australian Government announced that it is considering replacing Australia’s existing residency rules with a new ‘modernised framework’ This update is intended to be...

 

The New Requirement for Director IDs


10th Dec 2021
Daniel Wilkie

In June 2020 new legislation was passed that changes how directors are required to identify themselves This change was the first step made in an effort to modernise business registrations It means...

 

COVID-19 Financial Support for Individuals and Businesses – August 2021 Update


23rd Aug 2021
Daniel Wilkie

While the Federal Government’s Jobkeeper and Cash Flow Boost have wrapped up, the ongoing pandemic and resulting lockdowns continue This means that businesses and individuals right across the...

 

Potential Changes To Australia’s Personal Tax Residency Laws


16th Mar 2022
Matthew Marcarian

On 11 May 2021, the Australian Government announced that it is considering replacing Australia’s existing residency rules with a new ‘modernised...

 

The New Requirement for Director IDs


10th Dec 2021
Daniel Wilkie

In June 2020 new legislation was passed that changes how directors are required to identify themselves This change was the first step made in an...

 

COVID-19 Financial Support for Individuals and Businesses – August 2021 Update


23rd Aug 2021
Daniel Wilkie

While the Federal Government’s Jobkeeper and Cash Flow Boost have wrapped up, the ongoing pandemic and resulting lockdowns continue This means...

Foreign Resident Capital Gains Withholding Payment

Matthew Marcarian   |   3 Mar 2016   |   2 min read

Author: David Dai

New legislation in relation to foreign resident capital gains withholding payments for foreign residents who sell real property in Australia applies from 1 July 2016.
This rule applies to contracts to buy Australian real estate or interests in “Land rich” companies or trusts entered into with a foreign resident vendor.
For real estate transactions valued above $2 million, the purchaser must withhold 10% of the purchase price unless the vendor shows to the purchaser a clearance certificate obtained from the Australian Taxation Office (ATO).
Where no clearance certificate is provided, the purchaser by default is required to withhold 10% of purchase price and remit it to the ATO on or before settlement. Penalties apply for failure to withhold.
In certain circumstances, the ATO allows a variation of the withholding amount by an application from the vendor and an ATO generated variation notice must be given to the purchaser prior to settlement.
Even though the rule targets foreign resident vendors, mismanagement of the process can have an unintended withholding consequence where an Australian resident vendor fails to provide the necessary certificate to the purchaser on or before settlement.
Please note the 10% withholding tax is not a final tax, a refund can be obtained through the filing of the Australian tax return where the income tax is less than the withholding payment.

NEED ASSISTANCE FOR YOUR SITUATION?

Contact us today
Contact Us
By providing us your information you agree to our privacy policy

More articles like this

 

Potential Changes To Australia’s Personal Tax Residency Laws


16th Mar 2022
Matthew Marcarian

On 11 May 2021, the Australian Government announced that it is considering replacing Australia’s existing residency rules with a new ‘modernised framework’ This update is intended to be...

 

The New Requirement for Director IDs


10th Dec 2021
Daniel Wilkie

In June 2020 new legislation was passed that changes how directors are required to identify themselves This change was the first step made in an effort to modernise business registrations It means...

 

COVID-19 Financial Support for Individuals and Businesses – August 2021 Update


23rd Aug 2021
Daniel Wilkie

While the Federal Government’s Jobkeeper and Cash Flow Boost have wrapped up, the ongoing pandemic and resulting lockdowns continue This means that businesses and individuals right across the...

 

Potential Changes To Australia’s Personal Tax Residency Laws


16th Mar 2022
Matthew Marcarian

On 11 May 2021, the Australian Government announced that it is considering replacing Australia’s existing residency rules with a new ‘modernised...

 

The New Requirement for Director IDs


10th Dec 2021
Daniel Wilkie

In June 2020 new legislation was passed that changes how directors are required to identify themselves This change was the first step made in an...

 

COVID-19 Financial Support for Individuals and Businesses – August 2021 Update


23rd Aug 2021
Daniel Wilkie

While the Federal Government’s Jobkeeper and Cash Flow Boost have wrapped up, the ongoing pandemic and resulting lockdowns continue This means...