Expats face CGT hit in Australia

Australia is considering scrapping the main residence tax exemption for expats in a move that will hit thousands of Australians living abroad with CGT on the sale of Aussie family home.

Under existing laws, any capital gain – or loss – from the sale of a main residence, which is typically the family home, is disregarded if it was the main residence during the ownership period. This applies to apartments, caravans, houseboats or mobile homes.

The proposed laws will mean the CGT exemption will not be available “to any extent” if the individual is working overseas when the property is sold. Often those who work overseas will become a non-resident for tax purposes when out of the country.

For example, a couple bought a family home in Sydney in 2010 and lived in it for eight years before being seconded to New York by their US employer. While in the US they are considered to be tax non-residents.

They decide to sell in January 2019 while still in the US and the deal is completed in November that year.

Under the old rules their main residence would have been exempt from capital gains tax.

Under the new rules they are considered foreign residents for tax purposes and the sale will attract capital gains tax. The gain over the entire period will be taxable at non-resident tax rates, with the 50% CGT discount being available for the portion of the gain when the seller was an Australian tax resident.

Tax experts warn expatriate home owners seeking to avoid the tax could contrive circumstances by returning to Australia to oversee the sale of the property before return to their new domicile.

“This is an attack on principal residences. Just because we move overseas does not mean we are any less Australian. It is nuts,” said Christopher Koren, a director of buyers’ agent Morrell and Koren to Australian media outlet Financial Review.

Brexit is also prompting many Australians who work in London to reconsider their options, including buying local property as a future bolt-hole.


Pedro Gonçalves
Pedro Gonçalves is Financial Correspondent at International Investment.

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