Expats living in Australia under temporary resident rules have lost their capital gains tax (CGT) discount as part of the country’s tax grabbing budget.
Australians living overseas and expats in Australia benefitted from the tax break – but are now treated as foreign residents and lose the relief.
Critics say snatching back CGT will affect Australians working in the Middle East who have homes in Australia with a view to moving back to the country at some point in the future.
The Australian government has now removed the 50% discount on CGT enjoyed by non-residents on taxable Australia property which also includes mining assets and real estate.
Officials say the discount is no longer needed as an attraction for expats to buy property in the country.
Disappointment for expats
However, expats may still be entitled to a discount on capital gains accrued before the move was announced in the Australian budget in 2012, but was confirmed and came into effect when the latest budget was published on May 8, 2013.
The move will also affect profits made from managed funds and Australian shares.
Australians living or working overseas will now see the profit they may have made on property taxed at the full CGT rate, though older properties will see a portion of the profit being taxed at the discounted rate.
Pensions adviser David Retikin said the discount loss would come as a disappointment to Australians living abroad who frequently invest their earnings into property.
He added: “Australians like to invest in Australian property because it’s seen as a stable investment with a low tax status and it’s something they can return to later in life.
Other opportunities
“Losing the discount means that expats should now avoid investing in property.”
Australia’s property market has enjoyed a boom in recent years and many believe the market is overpriced – the ending of the CGT tax break means that expats would be paying more for less and then pay more tax on a smaller gain.
One upside to the move being promoted by Australian commentators is that there will be a dwindling of investment from overseas into the country’s property which should result in lower prices for buyers.
Paul Preston, a director at real estate firm IP Global, says Australian expats and British expats working in Australia shouldn’t worry about the ending of the discount rate.
He said: “The move for expats in Australia is in line with many other countries and so isn’t that unreasonable so while there isn’t an incentive for investing in Australian property there are still great opportunities for real estate investment in the country and in overseas markets such as London and Kuala Lumpur.”
Your article is not correct. The announcement in the May 2012 Federal Budget to remove the CGT Concession for Foreign investors and Expatriates has yet to pass into law and is not certain to be.
The draft legislation was recently released for public comment which closed on the 5th April. Treasury is not preparing a summary for the Government and this may see the matter dropped.
The Government is currently suffering from a crisis of revenue so is likely to drop this measure as it may jeopardise important revenues from the property sector by discouraging investment.
Our taxation firm has led this by preparing numerous detailed submissions and conducting an online petition to support to stopping of this change which has attracted almost 3,000 signatories.
To view the submission and more facts visit
https://aussieproperty.com/Competitions/Stop-The-Changes-To-Capital-Gains-Tax%20-On-Non-Resident-Taxpayers/132b8d20-8f85-47e2-9a4a-571b84f20ed6
Regardless as to whether or not this change may come into affect, the material difference of this tax change only softens slightly the many tax advantages on Australian property investment and tax planning opportunities for expatriates and intended migrants to Australia that can not be underestimated in their value.
Australian property remains a very safe and stable investment option and even a small increase in the tax position may not warrant takign the risk of other property markets that have proven historic volatility and dangerous supply v demand equations.