Long-term Aussie expat? You might have only 6 months to sell your main residence back home, if you want to avoid Capital Gains Tax (CGT).

9/11/2019.  On 23rd October, a bill was introduced by the Australian Government, that every Australian should take note of, if you own property back home.  The bill is a revision of that announced in the 2017-18 Budget, and if passed by Parliament it will remove the CGT main residence exemption for Australian expats, except under very special circumstances.

As the relevant page on the ATO website explains, only a short transition period is proposed – to 30th June 2020:

For property held prior to 9th May 2017:

• if sold before 30th June 2020, the current rules for main residence exemption apply;
• if sold after 1st July 2020, main residence exemption does not apply, except in the case of ‘certain life events’ within six years of you becoming foreign resident for tax purposes.

For property acquired after 9th May 2017:

• main residence exemption does not apply, except in the case of ‘certain life events’ within six years of you becoming foreign resident for tax purposes.

The ‘certain life events’ referred to above are:

• you, your spouse, or your child who was under 18 years of age, had a terminal medical condition;
• your spouse, or your child who was under 18 years of age, died;
• the CGT event involved the distribution of assets between you and your spouse as a result of your divorce, separation or similar maintenance agreements.

What This Means For You

The bill still has to be passed, but is expected to go through.  This means you should start considering your options for what could be a huge tax liability, that may not have been on your radar previously.

Capital Gains Tax In Australia

As a reminder, net capital gains in Australia are treated as taxable income, after a discount of 50% for assets held longer than a year.  There are a number of exemptions, and the ATO has a Capital Gains Tax Property Exemption Tool that will help you work out which (if any) apply, and what percentage of your gains are liable for tax.