C&G’s Guide to Expat Capital Gains Tax Changes
In the coming months we can expect more listings coming onto the market – particularly assets owned by Australians living abroad who wish to avoid losing their capital gains tax exemption. Currently, Australian homeowners are not required to pay tax for any capital gain from the sale of their primary residence - this includes those living internationally. However, after June 30 homeowners will need to live in the property should they plan on selling it and claiming the tax benefit. This latest C&G blog unpacks the new laws further.
Capital gains describe the profits earned when you sell your property for a higher price than the amount you purchased it for. The taxes associated form part of your income tax, referred to as capital gains tax or CGT. Personal assets such as primary residences have traditionally been exempt from CGT for Australian residents.
A recent article from Domain reports a London-based couple who have learned – purely by chance – that the home they purchased in Australia will incur a tax bill almost 20 percent of its sale price if they sell it while overseas and after June 30, 2020. The couple are particularly unhappy considering they were not informed of the changes, and have consistently paid relevant taxes when they elected to lease out their property. Following this unwelcome news, they now have 4 short months in which to sell the apartment to avoid capital gains tax.
According to the article, the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill was first introduced in the 2017-18 federal budget, coming into effect after the election of the Morrison government. It passed the Senate in December 2019. Not all expatriates have considered selling their homes, but many are rushing to do so following this news if they’re not planning to move back to Australia. A key concern is that the capital gains tax is calculated from the year they purchased the home rather than the date they relocated overseas. For many Australians, this could potentially result in a very, very large tax bill.
While this influx of new listings will keep Australia’s property market buoyant, it is proving an inconvenient and rushed process for vendor expatriates. Many have relocated for work, and it is certainly difficult to navigate the selling process when you are not physically present and your schedule follows a different time zone.
Chisholm and Gamon are Bayside’s leading agency and our team is well-versed in supporting the real estate requirements of expatriates. Living overseas and thinking about putting your property on the market? Reach out to us today!