Are you a Foreign Resident with an Australian Property? Confusion still reigns!

Are you a Foreign Resident with an Australian Property? Confusion still reigns!

We have discussed with you in previous issues of S & W Insight (May 2017 and April 2018) the problem that potentially exists in relation to property in Australia owned by non residents. As you may remember the government announced in their budget on 9 May 2017 the potential imposition of CGT on the sale of properties, even if they would normally satisfy the exemption rules for main residence. For properties owned prior to 9 May 2017 you were given a transitional period up to 30 June 2019 to sell the property if relevant. After 1 July 2019 if you were still a non resident then the sale of the property would attract CGT without access to the 50% discount. This would mean you would pay up to 45% tax on the sale. Properties bought and sold after 9 May 2017 by non residents would have no transitional period – the potential law would be applicable from 9 May 2017.

We are now at the very unsatisfactory situation where we are 4 months out from the end of the transitional date and the legislation has still not been passed. With a Federal election coming up and the possibility of a new government, it is very hard to know what to do. There is no real answer. The options if you have a home that was previously your main residence and you are currently a non resident are possibly

  • If you are never going to become an Australian tax resident again either
    • Possibly sell the property before 30 June 2019. It is a slowing market and time is tight to get the whole process exchanged before 30 June – so this may be difficult and you have to ask the question as to whether it is the right time to sell your particular property
    • Hold on to the property and see whether the legislation passes and whether the dates of transition are changed by the government when eventually it passes. If the legislation does pass then you may be paying CGT on a property that will not bear it if sold prior to 30 June.
  • If you are going to become an Australian resident again you would probably
    • Not sell it now as, under the current drafted legislation (which is waiting to be passed), when you return to being an Australian tax resident again, subject to the normal existing main residence CGT rules, you will then be exempt from CGT on the sale of the property again.

There is no easy answer. You can only make the call based on the current circumstances you are in and then follow the progress of the legislation carefully. Below is the link to our article in April 2018 which has some excerpts from the Explanatory Memorandum from the draft legislation. It has a couple of examples which clarify some scenarios.

Feel free to call us to discuss your particular circumstances if you want to. We will continue to keep you informed as to the progress of the legislation.

Kreston Stanley Williamson Team

*Correct as of February 2019

*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.

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