Comment on CGT review of main resident exemption for non-residents


Alfred Moller

Given the recent Liberal leadership spill, perhaps it’s wise to revisit the scrapping of the Capital Gains Tax (CGT) main resident exemption for non-residents. The exemption is currently sitting 29th in the queue of legislation yet to be discussed, however the current political climate causes further uncertainty.

Scott Morrison officially took office on the 24th of August 2018 after ousting former PM Malcolm Turnbull. With 2019 set to be a difficult election year for both major parties, the ability to pass legislation in both the Senate and House of Representatives will be slowed, creating uncertainty as the June 2019 CGT grace period looms. Understanding the implications of the proposed CGT change can assist Australian expats.

At present the current CGT exemption applies to expats, however if the bill passes there will be a CGT ‘Light switch’ which will grant expats a full CGT exemption or none at all. If you are planning to reside overseas permanently or if there is a slim chance of doing so, selling your main residence prior to June 2019 will avoid paying CGT on the sale proceeds.

However, if you are planning to move back to Australia, you will remain CGT exempt once you return and reside in your existing home. The CGT will be apportioned to your time as a resident.

Expat example:

You purchased your house in 2008 and moved overseas in 2010. The property is deemed to be your main residence for 2 years.

If you then move back to Australia in 2015 and reside in the property, it will not be deemed as your primary residence for the 5 years you were overseas.

If the property is then sold in 2018, 50% will be CGT exempt as you resided in your home for 50% of the time over a 10-year period.

Expats should speak to their families to understand whether moving back to Australia is feasible. If not, disposing of their Australian home prior to June 2019 will prevent unnecessary CGT on the sale.

For those planning to reside in Australia in the future, it is important to be aware of the current apportioned tax ruling, so talk to your accountant about how it might affect you.

By Alfred Moller, Expat Lending Specialist

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