CGT discount scrapped for Aussie non-residents

British expats in Australia have lost a valuable tax break as part of federal budget changes.

Capital gains tax rules have changed, wiping out a 50% concession for non-resident taxpayers disposing of Australian property.

The move will affect expats who move to Australia and buy – and then are relocated or change their minds about staying.

The change is backdated until May 8, 2012, so applies to any transaction that took place between then and the announcement on July 30, 2012 and onward.

Non-residents can still claim the concession against any capital gain accrued before 7.30pm on May 8, 2012, provided a written valuation is filed by the non-resident listing the market value of the Australian taxable property on May 8, 2012.

This means, if the property is owned for more than a year, any capital gain accruing after May 8, 2012 and up to the date of sale, or the permanent re-entry date of non-resident taxpayer or expatriate will be taxed at 100% instead of 50%.

Expat investors have two tax options:

  • Pay CGT on the full capital gain without the 50% CGT discount concession
  • Get a market valuation of the property from a certified practising valuer as at May 8, 2012 to claim partial 50% CGT discount concession.

Either way, non-residents are likely to pay more tax and face higher charges when disposing of property in Australia.

If the property is owned by a UK resident, they must also declare the disposal and calculate any capital gains tax due in the UK.

As the UK and Australia have double tax agreements, tax paid in Australia is credited against tax due in the UK to prevent paying tax twice on the same proceeds.

This process involves filling in tax returns in both countries.

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