Last December we released a Tax Alert confirming that the Federal Government had revived its plan to remove access to the Capital Gains Tax (CGT) main residence exemption for non-residents, which will directly impact both expat Australians (living overseas for an extended period) and foreign tax residents.
However, it is very important to note that where an Australian resident taxpayer who owns a main residence in Australia, purchased before 9 May 2017 and then becomes a foreign tax resident on (say) 1 March 2020, the taxpayer must dispose of the property by 30 June 2020 in order to utilise the full benefit of the CGT main residence exemption.
In this example, if the taxpayer waits until after 30 June 2020 to dispose of their Australian main residence, no CGT exemption will be available.
While this outcome for tax purposes seems very unfair, and we agree, it is now the law.
The option currently available for taxpayers to utilise the full benefit of the CGT main residence exemption include:
Dispose of the main residence before 30 June 2020;
Wait until you re-establish Australian residence sometime later; or
Do not dispose of the main residence.