The Australian government plans to hit expats with an overhauled capital gains tax that will impose an unfair death burden for Australians who die overseas and their relatives, according to experts.
Over 100,000 Australians living and working overseas face losing a capital gains tax exemption on their main residence if they sell the property while living away from Australia as part of housing affordability measures announced in the 2017 budget.
Tax experts say the legislation could result in the retrospective denial of the exemption as far back as September 20, 1985 – when the capital gains tax regime commenced.
“If a person is living in Australia and have a residence, retires and decides to live overseas to experience a different life but then dies while they’re away, we’re passing on a death tax to their beneficiaries,” BNR Partners estates and trusts division director Ian Raspin (pictured) told The Australian Financial Review.
“These are their kids waiting in Australia but because mum or dad had the audacity to die while they were overseas, they’ll be caught.
“Had they moved back to Australia, the house would still be exempt from capital gains tax when they moved back in,” he added.
Expatriates in Hong Kong have launched a global campaign to overturn the proposal, expected to raise A$580m for the budget.
For example: an Australian that bought a house for A$100,000 in 1986 and lived in it for the next 20 years. By 2016 the property has a market value of A$2.2m.
The person then rents out the property and becomes a foreign resident. By 2021, the same property is sold for A$2.5m. The owner would have to pay tax on all of the gains over the entire 35 years because they had been working overseas, according to the local news outlet.
“I see it as a death tax, and a fairly penal one to be honest,” Ian Raspin said.