Calls grow for delay to Australian 'expat residence tax'

Pressure is growing for the Australian government to extend its deadline for a recently introduced expat residence tax, with many Australian expats now struggling to sell their properties ahead of the June tax deadline in order to avoid a heavy capital gains tax.

Under the legislation, Australians overseas who have not sold their family homes by June 30 will be hit with capital gains tax — regardless of whether the home was rented out or left vacant — and the tax bill would have dated back from the time the owner purchased their home, not the point at which they moved overseas.

However in recent weeks the covid-19 pandemic has left many Australian expats with little option but to delay the sale of their properties.

As reported by International Investment in February (before the current covid-19 crisis), thousands of Australian expats have until 30 June to sell their family homes or face being slapped with a hefty capital gains levy, after the Canberra government reversed its position for exemptions.

II wrote: "CGT tax exemption on [expats'] family homes is to be scrapped under the A$581m federal government plan. It is estimated that the change will hit the wallets of up to 100,000 Australians working overseas."

Atlas Wealth Management is among the financial advisory firms pushing for the current deadline for Main Residence Exemption Changes to be changed to later than 30 June (Main Residence Exemption transition period for those Australian expats overseas as at the 9th of May 2017).

Atlas argues that many expats have faced insurmountable obstacles that no one could have foreseen.

Atlas points out that, although the bill was first proposed in the federal budget in 2017, Australian expats have only had since 12 December 2019  to make a fully informed decision as that was when the bill received royal assent.

With the implementation of Stage 2 Restrictions by the federal government, a ban on real estate auctions and open house inspections now makes it "almost impossible for an Australian citizen to sell their property within the required time frame," according to a statement on Atlas' website.

According to Atlas, obstacles Australian expats are experiencing with selling within the required time frame include:

• Travel bans and border closures resulting in the inability of the expat to return to Australia to prepare their property for sale.
• Quarantine requirements of 14-days for all Australian citizens returning to Australia negating their ability to meet with real estate agents and prepare their property for the sale process.
• Tenants testing positive for covid-19 creating uncertainty with respect to being able to gain access to the property and show the property to potential buyers.

In its statement this weeks, Atlas said: "It is unfair to have expected Australian expats to have acted on the proposed legislation when it was announced in 2017 as the bill had not received Royal Assent until 2019 and it would have been difficult to manage their Australian expat tax obligations on a guess of whether this would pass on not."

Atlas called on the government to "announce an extension of the deadline for the main residence exemption and a transition period of at least 12 months so that Australian citizens can fully avail themselves of the flexibility offered as prescribed in the legislation."

Last month Atlas wrote a letter to seven MPs and Senators asking for them to assist Australian expats in this difficult time.

In February, Carson Teh, a data analyst from agent comparison site OpenAgent.com.au told II: "The changes to the capital gains tax main residence exemption will make a huge difference for Aussie expats living overseas that own property anywhere in the country."

The exemption for Australian expatriates has been available since 20 September 1985, and was applicable so long as the home was rented out for no more than six years at a time.

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