Potential Large Capital Gains Tax Bills for Expats
December 7, 2018
In May 2017, the Federal Government announced plans to scrap the main residence exemption for Australians who sell their homes while living abroad.
Currently Australians living abroad are able to claim the capital gains tax (CGT) exemption on their family home as long as the home has not been rented out for longer than six years. Now, if the change is passed in government many families could be hit with a hefty tax bill regardless of whether the home has been rented out or not. The main issue with the legislation is that is it retrospective meaning the tax bill would date back to the purchase date and not the date the owner moved overseas.
Robyn Jacobson a senior tax trainer at TaxBanter is concerned it will stop skilled Australians from eventually returning. Ms Jacobson said “We are trying to encourage people to go overseas skill up, and come back to Australia, not to discourage them.” Paul Drum head of external affairs at CPA Australia hopes the proposed legislation will be amended to remove its retrospective application. He said “Ordinary Australians who are living abroad for personal or business reason bear the greatest risk – and the financial consequence could be quite dramatic for them.” BDO tax partner Mark Molesworth believes taxing “the gain proportionately, based upon the period of non residency as a fraction of the entire ownership period” is a more reasonable solution.
The amendments on the CGT apply to all properties purchases after 9 May 2017. Existing properties are grandfathered until 30 June 2019.