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Legislative changes made earlier this year prevent foreign residents from accessing a capital gains tax (CGT) exemption on their Australian family home (the main residence exemption).
A transitional rule enables foreign residents who have held their property continuously from 9 May 2017 to access the exemption if they sell by 30 June 2020 (or sign a sale contract).
After 30 June 2020, if you are a non-resident for tax purposes at the time you sell your main residence, you will no longer be able to access the main residence exemption and you will need to pay CGT on any gain you make. These new rules apply regardless of whether you were an Australian resident for part of the time you owned the property and no apportionment applies – the exemption simply does or does not apply depending on your residency status for tax purposes at the time the CGT event is triggered. The CGT event is generally triggered when the contract of sale is signed.
However, if you are a resident of Australia at the time of the CGT event, then you may be able to access the main residence exemption, even if you have been a non-resident for some or most of the ownership period. For example, an expat who maintains their main residence in Australia could return to Australia, become a resident for tax purposes again, then sell the property and if applicable, access the main residence exemption (the rules contain provisions that will deny the exemption where someone attempts to avoid the new rules by deliberately structuring their affairs to access the exemption – for example, transferring the property to a related party).
An exclusion also applies where the individual has been a foreign resident for six years or less and a ‘life event’ occurs such as death or a terminal illness.