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Is my Aussie home’s tax-free status at risk after recent changes to tax exemptions?
When changes were announced for the tax-free treatment of the Principal Residence Capital Gains Tax (CGT) Exemption, a lot of details were lacking.
However, recent draft legislation indicates a concerning shift in policy, according to Steve Douglas, Australian tax advisor at SMATS Group. Under current rules, any Australian citizen or permanent resident that moves overseas continues to be entitled to a CGT-free status for the period of time they had lived in their home in Australia. This is further enhanced by an additional period of up to six years tax free while living abroad, even when the property is rented.
However, with the release of the new draft legislation, the wording is aimed squarely at expatriates and has several devastating consequences.
If the legislation passes, then you will need to consider the following: Firstly, the current period of tax free for time spent actually living in the property will be lost.
Secondly, If the property is sold while living overseas, the full gain will be subject to Australian tax. Also, the current additional six years tax-free under the Temporary Cessation Rules would be removed and lost.
Furthermore, any expat that inherits an Australian property while living overseas would be denied the benefit of the CGT Exemption if it was the deceased person’s principal residence.
It follows a recent pattern of increased taxes on Australian property owners living abroad, which started in 2012 when the 50-percent, tax-free allowance was removed.
In more recent times, we have seen the introduction of the Foreign Buyers Fees and higher land tax levies in each Australian state.
In my opinion, this latest proposal is, perhaps, the worst, and I recommend that we stand together to stop the legislation from passing through. SMATS has prepared and lodged a submission against the changes and you can join our online petition.
The team at SMATS believe that this is a case of poorly drafted legislation, rather than change in government policy, so it is essential to provide a sensible argument to have more appropriate legislation prepared.
The proposed changes are not due to take effect until July 2019, so there is no need to panic at this stage, but we recommend working together to ensure that any new laws maintain the fairness of historical entitlement and do not harshly penalise anyone for simply working abroad.
Visit www.cgtchange.com for more information and to join our petition against these changes.
SMATS - Australasian Taxation Services
10 Jalan Besar, #17-01, Sim Lim Tower, Singapore 208787
Tel: 6293 3858
Web: http://www.smats.net
Steve Douglas is the Co-Founder and Managing Director of Australasian Taxation Services (ATS). ATS provides specialist taxation services for anyone looking to invest in Australian property, including Australian expatriates living overseas. Areas of specialisation include the Australian taxation aspects of property investment, as well as expatriate and migration planning.