An important change to the CGT main residence exemption for foreign residents was recently passed. As this will significantly impact a number of our clients, we provide some detail below.
Who is Impacted?
This change will impact individuals who are foreign residents for tax purposes, and who will be selling their main residential property in Australia. Previously, these individuals were able to claim a CGT main residence exemption.
The Changes to the CGT Exemption
The new rules are dependent on when you acquired your property, and when you dispose of your property, as follows:
1. For Property Held Prior to 9 May 2017 and Disposed by 30 June 2020:
The CGT main residence exemption can still be claimed for disposals that happen up until 30 June 2020 and only if they meet the other existing requirements for this exemption.
2. For Property Held Prior to 9 May 2017 and Disposed After 1 July 2020, AND, For All Property Acquired After 9 May 2017:
In either of these cases, you will no longer be entitled to the CGT main residence exemption unless you meet the following criteria:
You were a foreign resident for tax purposes for a continuous period of six years or less and during that time one of the following life events occurred:
· you, your spouse or your child (under 18 years) had a terminal medical condition,
· your spouse, or your child (under 18 years) died
· the CGT event involved the distribution of assets between you and your spouse as a result of your divorce, separation or similar maintenance agreements.
We suggest you carefully consider any plans for selling your main residence in Australia whilst a foreign resident for tax purposes. If this change is likely to impact you, please give us a call on (02) 9908 9888 to discuss further.