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End of CGT exemption for foreign residents

No CGT exemption for foreign residents selling the former family home from 30 June 2020

After 30 June 2020, foreign residents will no longer be eligible for the capital gains tax (‘CGT’) main residence exemption. There will be no apportionment based on the number of days of non-residency nor the value of the property at the time of non-residency.

Foreign residents should consider whether they want to take advantage of the main residence exemption before 30 June 2020. The main residence exemption may still apply if a foreign resident sells their property before 30 June 2020 and the property was purchased before 9 May 2017.
Couples who jointly own their main residence, but where one partner is a resident and one partner is a non-resident, should seek advice before the 30 June 2020 deadline.

After 30 June 2020, the main residence exemption will not be available to an individual who is a foreign resident when the CGT event occurs. A person may be considered a resident of Australia if they have returned to live permanently in Australia or they no longer have a permanent residence outside Australia.

Sometimes, whether an individual is a foreign resident will also depend on how the double tax agreement between Australia and another country applies to their circumstances.

One practical issue for foreign residents selling their former main residence will be gathering the records to substantiate the cost base of their property. Besides the purchase price of the property, the cost base may include interest payments, rates and the cost of maintenance, repairs and renovations.

Many people may not have retained these records because they relate to their main residence and they expected to apply the main residence exemption when selling the property.

Foreign residents will need to calculate the CGT general discount when they dispose of the property. The general discount, which is 50% for Australian residents, is reduced based on how long the individual has been a foreign resident while owning their property.

There are limited exceptions where an individual, their spouse or child has a terminal medical condition or where an executor is administering an estate of a foreign resident, but these limited exceptions only apply where that individual was a foreign resident continuously for less than six years.

 

More information

You can find out more information about CGT issues for foreign residents on the ATO’s website by clicking here.

 

Legal help available

If you have any queries regarding this article or need legal assistance please call us on 07 5597 3366 or fill out the ‘Contact Us‘ form at the bottom of the page.

Please note that this article has been prepared by Margaret Miller, partner of Bell Legal Group, for information purposes only. It is not legal advice nor should it be relied upon as such.