In this year’s Budget the Government announced that the main residence exemption that was previously available to non-residents would be removed. Up until the proposed changes, Australian expats who had lived in a property, and then rented it out upon moving offshore were eligible for the 6-year capital gains tax exemption. The proposed legislation meant that for Australian expats who sold their property while living offshore, they would be taxed on the gain since they left Australia and would not be eligible for the 6-year rule.
We have now seen further details of how this ruling may be applied released this week, which appears to be worse than first thought.
The new draft rules not only state that the main residence exemption will not be available to non-residents, but that you would be taxed on the entire gain and no time-apportionment would be available. This would mean that if you purchased a property while living in Australia and remained there for 5 years, moved offshore for 2 years and sold the property, you would be liable for tax on the gain for the entire 7-year period.
Thankfully, there are transition rules in place if property was owned prior to 9 May 2017 and is disposed of by 30 June 2019. This is all still in draft stage so nothing is in force yet, however it is likely just a matter of time.
While a simple response from many is to simply avoid selling the property while they’re living offshore, if the negative gearing rules were to change if we have a change of Government in Australia, this may lead to other complications.
Given the complexities of this rule change, and potential tax liabilities, we would recommend consulting your Australian qualified adviser to consider your own financial strategies and any impacts of the proposed changes.
To your financial success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group, division of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is licensed by Global Financial Consultants in Singapore, with a team of Australian-trained, experienced and qualified, allowing us to provide specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.