Foreign tax residents will no longer be able to access the main residence CGT exemption, unless a specific life event such as death, a terminal medical condition or divorce occurs.
There will be a vast number of Australian expats who get caught up in these changes simply because they were not aware and were operating under the belief that the existing six-year temporary absence rule was still in effect
Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 has been passed by the Senate today and now awaits royal assent.
They will either have to decide to sell their property before the 30th of June 2020 to retain either a full or partial entitlement to the Main Residence Exemption or to retain the property until they return to Australia and elect to become a resident for tax purposes.
The bill will allow individuals who have been foreign residents for six years or less to access the CGT main residence exemption if, during the period of that foreign residency, they undergo certain life events.
A life event includes a terminal medical condition to the foreign resident, their spouse or their child under 18 years of age; death; and divorce or separation.
“It’s game over for thousands of affected Australian expatriates who will now be taxed on the sale of their former Australian homes back to the original date of acquisition, a period of up to three and a half decades ago with no access to the six-year absence rule or the ‘reset cost base to market value’ rule,” said TaxBanter senior tax trainer Robyn Jacobson.
“This is a very disappointing, but expected, closure to the parliamentary year, 940 days since the date of the original announcement.”