Australian expats living abroad may soon by slumped with big capital gains tax (CGT).
There are plans for the CGT tax exemption on their family home to be scrapped, which means that thousands of Australian property owners living abroad could potentially face hefty tax bills.
The exemption for Australian expatriates has been available since 20 September, 1985, and was applicable so long as the home was rented out for no more than six years at a time.
The Federal Government’s $581 million plan was first flagged in the 2017-2018 budget, and Australia’s Federal Treasurer Josh Frydenberg told ABC News that the policy would proceed during an interview in July 2019. It passed through Senate in December and eliminates the CGT exemption for people living overseas. The new tax bill will date back from the time the owner purchased their home and not the date when they moved abroad.
The bill will impact Australians who live abroad but who come to Australia for temporary periods. It will also apply to foreign nationals who buy a home in Australia to live while living in the country, which they will need to sell before moving back home.
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To avoid the tax, property owners who already held property on 9 May, 2017, while living abroad have until 30 June, 2020, to sell their properties and claim the CGT main residence exemption. Exception to the CGT exemption would be available if the resident moves back into their home before putting it on the market.
Amendments to the 2017 proposal have included hardship exceptions for Australian expat homeowners with terminal medical conditions or in the case of death or divorce. The hardship relief is only applicable for property owners that have been foreign residents for six continuous years or less.
The Australian Tax Institute’s senior tax counsel Bob Deutsch told the ABC that it is an “outrageous piece of legislation” and said that the “draconian measures” would affect thousands.
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There are concerns that a high number of Australian expats are unaware that the previous six-year temporary absence rule is no longer applicable and would be caught out by the new rules.