Forewarning to non resident owners of residential properties
The government has proposed that the Australian home of a non-resident for tax purposes, including Australian expatriates will no longer have access to the capital gains tax main residence exemption on disposal.
As proposed, non-residents who acquired properties by or before 9 May 2017 have until 30 June 2019 to dispose of the property to still access the main residence exemption. The measure applies in full for properties acquired after 9 May 2017.
It should be noted that the change is retrospective in that it applies to homes acquired from 20 September 1985. Further, it does not matter whether the taxpayer was a resident or non-resident at the time of purchase – the only fact for consideration is that the owner is a non-resident at the time of disposal.
For example, an Australian resident bought a home in 1986. In 2016, the Australian resident takes up an opportunity to work overseas and becomes a non-resident. In 2020, the person decides to sell their Australian home.
As they were a non-resident at the time of disposal, the capital gain on the property for the entire period from purchase in 1986 to disposal in 2020 is taxable. This could result in an unexpected tax bill in the many hundreds of thousands of dollars if not more. The measure will, if passed, also have an impact on beneficiaries should the owner of an Australian home die as a non-resident.
If you are an Australian resident living overseas or thinking of moving overseas, you should contact your registered tax agent for advice on this proposed measure.
This article is intended to be a guide only. None of the comments contained in the article are intended to be advice, whether legal, financial or professional. You should not act solely on the basis of the information contained in this article because many aspects of the material have been generalised and the tax laws apply differently to different people in different circumstances. Further, as tax and related laws change frequently, there may have been changes to the law since this article was published. Specific advice should always be obtained from a tax professional.