CGT exemptions have been scrapped. What does that mean for you?
Are you an Australian living or working overseas with a family home in Australia? Or you know someone who is? If so, be sure to consider the impacts of the capital gains tax (CGT) on you from 30 June 2020.
Since 1985, the exemption of Australian expatriates from the CGT tax has been available for homes which have never been rented out for more than six years at a time. However, following the scrapping of the CGT exemption under the A$581m federal government plan, Australians working overseas will have to sell their property before the 30th of June 2020 to avoid CGT and still be eligible for CGT main residence exemption.
With the removal of CGT exemption past June 2020, Australian ex-pats who own property in Australia will be required to pay CGT dating all the way back to when they first bought the property. That is, if an ex-pat was to have bought their property in 1985, they would have to pay an accumulation of their tax owing in CGT from 1985 to 2020. The only way to avoid such hefty tax payments would be to sell your property on or before the 30th of June or to re-establish Australian residency before selling the property.
Understandably, the new change will impose a sizable cost on Australian ex-pats and has come as a result of the influx of speculative foreign investors as well.
As every situation is unique, taxation planning customised to every taxpayer’s specific circumstances are advised. In order to avoid the accumulated CGT payments, Australian expats need to be aware of their financial standings and be ready to make a quick decision regarding the selling or keeping of their Australian property.
Seeking out tax advice from knowledgeable tax specialists, employing organised bookkeeping services and detailed financial statements written up by accountants in preparation for making such an important decision regarding your Australian property is heavily recommended to ensure the new CGT laws don’t cause you financial problems.
