The worry of a capital gains tax crackdown on Australian expats selling a property back home while living overseas won’t go away.
Expats who sell their home in Australia while living and working overseas have enjoyed a CGT exemption for decades – provided the property was not rented out for blocks of more than six years in a row.
But the Coalition government proposed to scrap the tax break in the May 2017 Budget with the hope of raising AUS$581 million in extra taxes.
The new CGT rules could impact up to 100,000 Australian expats who still own homes despite living overseas.
They would have to pay CGT if they sold their property while living abroad regardless if the home was rented out or not.
Controversially, the measure would apply from the date the home was purchased, not the date when the expat left Australia.
Everyone thought the move was dead in the water when the bill lapsed on July 1, but in a TV interview, Treasurer Josh Frydenberg announced the changing the law for expats is still a policy priority for the Coalition Government.
However, he did not indicate when the measure would be reintroduced or if the bill would be revamped to mark an easier route through the Senate.
The Treasurer is also seeking to close a loophole that would allow expats to return to Australia to sell their homes and then move back abroad.
Make the law fairer, say tax experts
Tax partner at global accountancy firm KPMG Mardi Heinrich said the proposed changes would have potentially resulted in large Australian CGT bills for citizens and permanent residents selling their main residence while residing overseas as a tax non-resident of Australia.
“Transitional provisions under the lapsed law meant non-resident taxpayers would have been required to sell their main residence by June 30, 2019 in order to take advantage of the CGT main residence exemption,” she said.
KPMG is also calling for a softening of the proposed CGT law by moving the date CGT is applied forward from the purchase date to the date the expat left Australia.
“This would be a lot fairer on expats that the current proposals,” said Heinrich.