Australia: Capital gains tax changes for foreign residents

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July 2017

Overview

As part of the 2017-18 Federal Budget, the Australian Government announced on May 9, 2017 a range of reforms to reduce pressure on housing affordability and to put “Australians first for Australian housing”.

One of the Federal Budget announcements was that as of 7:30pm (AEST) on May 9, 2017 foreign and temporary tax residents would no longer be exempt from capital gains tax (CGT) when selling their main residence; this rule was made subject to grandfathering for existing properties held on this date and disposed of on or prior to June 30, 2019.
 
The Government has now released an Exposure Draft 0f a Bill to implement these measures for consultation. The closing date for submissions on the Exposure Draft is August 15, 2017.

In the Exposure Draft, the Government has made a policy change to ensure all Australian tax residents, including those who are temporary tax residents, can continue to access the main residence exemption. This is a welcome development, as it was initially thought that all temporary tax residents would not be able to access the concession. Temporary tax residents are individuals who hold a temporary visa and who also meet other requirements.
 
However, the Exposure Draft proposes that the CGT main residence exemption will be denied from 7:30pm (AEST) on May 9, 2017 for foreign residents. In addition, there will be no apportionment of the main residence exemption based on days of ownership over the whole period of ownership. Existing properties held on May 9, 2017 will be grandfathered until June 30, 2019.  For the purpose of the Exposure Draft, “foreign resident” means someone who is not a tax resident of Australia.

Foreign residents, including Australian citizens and permanent residents who are foreign residents, should consider how these changes will impact their circumstances.

Contact us

Leo Palazzuoli

Global Mobility and Immigration Leader, PwC United Kingdom

Tel: +44 7738 310312

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