As tax accountants, we have discussed with you in previous issues of S & W Insight (May 2017 and April 2018) the problem that potentially exists with 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 typically satisfy the exemption rules for a primary residence.
For properties owned before 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 in a very unsatisfactory situation where we are 4 months 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 tough to know what to do. There is no honest 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. 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 transition dates are changed by the government when it eventually passes. If the legislation passes, you may be paying CGT on a property that will not bear it if sold before 30 June.
- If you were going to become an Australian resident again, you would probably:
- Not sell it now as, under the currently drafted legislation (which is waiting to be passed), when you return to being an Australian tax resident again, subject to the ordinary 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 your current circumstances 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: http://stanleywilliamson.com.au/removal-main-residence-exemption-foreign-temporary-residents-doesnt-look-good/
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
*Correct as of February 2019
Disclaimer – Kreston Stanley Williamson has produced this article to serve 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 in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
