In December 2019 the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 was passed.
The controversial bill denies non-residents for tax purposes the ability to claim the main residence exemption on the sale of a property, subjecting them to capital gains tax, even if the property was their former home.
If an individual sells a property in Australia, and at the time of disposal, they are a non-resident for taxation purposes then the property will be subject to capital gains tax. Previous rules have come in which either reduce, or totally disallow, any capital gains discount as well.
A transitional rule applies allowing properties sold prior to 10 May 2017 and sold before 1 July 2020 to be able to still apply the main residence exemption.
Foreign tax residents will be exempt from these rules if you are a foreign resident for a continuous period of six years or less and one of the ‘life event exceptions’ occur during this period. The ‘Life event exceptions’ are:
The individual, spouse or a child under 18 is diagnosed with a terminal medical condition
The individual’s spouse or child under 18 dies whilst the individual is a foreign resident
The sale occurs because of the distribution of assets in a family law context such as divorce or separation
Strangely, the death of the individual who owns the residence is not a life event.
If you are a foreign resident for taxation purposes, and you own a residence in Australia then we suggest that you contact us as soon as possible to discuss your options.