Australian homeowners living and residing abroad would be required to sell their property before June 2020 to benefit from the capital gains tax (CGT) exemption.
The Australian Labor Party recently expressed support for the bill removing the CGT exemptions for Australian expatriates. Deputy Treasurer Michael Sukkar presented the revised bill to Parliament last month and a vote before Christmas is expected to seal the deal on the new tax rules.
The changes were introduced for the first time in the 2017-2018 budget. After receiving negative reactions from expatriates, the federal government decided to suspend the changes before the national elections. However, Federal Treasurer Josh Frydenberg said the government would ensure that changes are put in place.
"This remains the policy of our government, and our policy remains as it was before the election," he said in recent reports.
Exceptions to the rules
Mardi Heinrich, KPMG's tax partner, said the bill included provisions for exceptions.
Aside from the transitional provision, which allows Australian expatriates to be further exempted before the new rules are implemented, certain life events could help them to qualify for the exemption.
"These circumstances are described as" life events "and include a terminal health condition or death, and also include a situation in which the CGT's property event occurs in the life event. part of a family law case, as in the following case: divorce or separation or similar maintenance contracts, "Heinrich said.
However, these events will be taken into account only if an Australian has been a foreign resident for a period of six consecutive years or less.
In addition, Heinrich explained that the changes made would not result in a proportional or proportional capital gain, which could potentially allow a partial exemption.
"On the contrary, the entire capital gain realized over the entire holding period would be subject to the Australian CGT, and the period during which the property was held as an Australian tax resident is irrelevant. moreover, the six-year period is not taken into account: "rule of absence" in determining the taxable capital gain when the contract is concluded as a foreign resident, "she said.
Ignorant Expats
In a report published in The Australian Financial Review, Managing Director of Atlas Wealth Management, Brett Evans, said that many expats were unaware of the proposed changes.
"A large number of Australian expatriates will be trapped in these changes simply because they did not know it and thought that the current rule of six years of temporary absence was still in effect ", did he declare.
For Mark Chapman, tax expert at H & R Block, the changes could be confusing for homeowners.
"You will not get the exemption literally, no matter how long you have owned the house, no matter how long you lived there as a principal residence." But now the government has decided to bring it back again, so this creates even more confusion for foreign residents who have their main residence here, "he said in a separate report from News.com.au
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