Home owners who sell while they’re living overseas could lose the capital gains tax exemption on a home which used to be their main residence in reforms targeted at foreign investors to safeguard the opportunity for Australian buyers to purchase.
The reforms are part of a host of changes to policy investment rules aimed at improving housing affordability, announced as part of the 2017-18 Federal Budget in May.
Under current laws, Australian residents get a full exemption from capital gains tax on the sale of a home that was their main residence throughout the ownership period. Capital gains tax is a tax on the profits earned on an asset in the time that a person buys then disposes of it. It’s not a separate tax but rather the capital gain is included in a person’s taxable income in the year when the sale was made, then calculated as part of income tax.
Australian residents also receive a partial exemption if the home was their main residence for only part of the ownership period. And they benefit from an “absence rule,” which allows them to treat a dwelling as their main residence for capital gains tax purposes for an unlimited period of time, as long as they keep it empty and don’t rent it out.