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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John Allan

Support for the Federal Government among small and medium businesses (SMBs) has fallen into negative territory and to the lowest level since Malcolm Turnbull took over as Prime Minister, according to the latest Sensis Business Index (SBI) survey.

The net balance fell four points this quarter (+2 to -2). This score is calculated by comparing the number of SMBs that feel supported by the Federal Government’s policies (14%) to the number that do not feel supported (16%).

Sensis Chief Executive Officer, John Allan said: “After Malcolm Turnbull took over as Prime Minister in 2015 we saw confidence in the Government rise, with businesses telling us they were optimistic about the change.”

“Since then the Government’s approval rating has fallen nine points and is 20 points lower than the highest score we saw under Tony Abbott, following the pro-business Federal budget of 2015. To find a lower score we need to go back to the March 2015 survey, which was taken after Tony Abbott had survived a leadership spill.

“While perceptions of the economy remain strong, less than one in seven businesses have faith in the Government’s policies, with the biggest concerns being excessive bureaucracy and red tape, as well as there being too much of a focus on the interests of big business,” he said.

The Index, which reflects the views of 1,000 small and medium businesses from across Australia, also revealed that despite a tough quarter for the Government the long term projections for the economy have improved to their best level in 2 ½ years.

“Perceptions of the current state of the economy fell slightly, but when we look further ahead businesses are feeling the most optimistic they have been since the carbon tax was repealed in 2014,” said Mr Allan.

The net balance score for current perceptions of the economy now sits at +2, while the expectation for the economy in a year’s time have risen to +10.

“When we look at the key indicators, sales, employment, wages and prices are all positive, while profitability has also improved, despite still recording a negative score. When you mix these results with the fact that business confidence remains at one of the best levels we’ve seen in the past seven years, it’s not surprising to see the long term economic sentiment improve,” said Mr Allan.

“Businesses are expecting a solid increase in prices this quarter, which may give inflation a push, helping the Reserve Bank to justify a rate hike at a time when everyone is keenly watching their every move.”

In terms of business confidence there was a two point fall nationally, with the score now sitting on +44, which is the second best result since March 2010.

Across the states and territories only ACT, Tasmanian, Queensland and NT businesses became more confident, while WA businesses maintained their score, and the other state and territories went backwards.

“The results were fairly flat this quarter, although the ACT saw an 18 point spike and now sits in top spot – driven by strong sales results – in the first full survey taken since the ACT election,” said Mr Allan.

“In a sign of what was to come, the WA Government’s score fell as it headed towards the election loss, with SMBs reporting concerns the Government was too focussed on the interests of big business.”

At an industry level there were mixed results in terms of business confidence, with seven out of 10 industries going backwards this quarter. The three sectors that improved were Health and Community Services; Building and Construction; and Retail Trade.

“We saw big declines in confidence in the manufacturing and hospitality sectors this quarter driven by poor sales results, with manufacturing really struggling compared to the other industries. Fortunately, expectations are for an improvement in sales this quarter,” said Mr Allan.

Comparing metro and regional results, there was little change this quarter, with metropolitan businesses again more confident, now by a slightly reduced margin of seven points (+47 vs +40).

“Overall more businesses in the capital cities are feeling confident and it comes down to their perceptions of the economy. They believe the economy is travelling well, whereas more regional business owners feel pessimistic,” said Mr Allan.

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Sally Loane

The Financial Services Council congratulates Malcolm Turnbull on becoming the new Prime Minister-designate of Australia.

Sally Loane CEO of the FSC said: “Mr Turnbull brings a wealth of experience in business, financial services and politics which the nation needs at this time.”

“We encourage the new government to focus on polices which can be achieved and support an agenda which make competition, trade, tax and federation reform priorities.”

“These are the areas that will sustain the economy and create more employment opportunities in our growing nation,” Ms Loane said.

“The Financial Services Council looks forward to working with the Turnbull government to create opportunities for our future as a services-based economy.”

“We also thank Tony Abbott for his work in creating a platform for much-needed reforms.”

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