Residents of Australia who live abroad will no longer be able to enjoy capital gains tax (CGT) exemption on their family home. This is after the Australian Parliament passed new laws that changed certain policies on the CGT.
More than 100,000 Australian expats are expected to be affected by these new laws. On the other hand, the government is expected to generate $581 million from these taxes.
Under the new legislation, expats who fail to file income taxes will be forced to pay the capital gains tax if they decide to sell their family home. Unlike before, family homes sold within a six-year period did not attract taxes for all Australian residents whether living in the country or overseas.
As an example, a residential property in Sydney purchased for $1.2 million and now valued at $3.8 million will now be taxed a full capital gain worth $2.4 million.
There’s still an opportunity for expats, though, to enjoy the CGT exemption before June this year. Those who sell their family home before June 30,2020 can still avail of the exemption but they have had to own the property prior to May 8, 2017.
According to Darren Morris of Bell Partners, one strategy to practice is for expats to come back to Australia to start their tax residency. He says this is important as the tax office is very keen on doing this practice.
Investment properties are not covered by the new laws. They can still avail of the 50 percent discount on condition that the family has owned it for more than 12 months.
These changes in the CGT exemption are aimed at addressing the housing affordability problem in Australia. House prices notably in Melbourne and Sydney have been rising the past five years and many first home buyers are left out of the property market.
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By Wendy Chamberlain
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With a passion for all things real estate spanning over 20 years, Wendy loves that her role as a Buyers Agent and Sellers Advocate gives her buying and selling clients an experienced voice they can trust when it comes to negotiating to buy or sell something as important as their home or investment. Wendy considers it a privilege to be asked to help others realise such an important goal as home ownership and to be trusted with that honour. Get in touch today via www.wendychamberlain.com.au for a no obligation chat about how Wendy can work with you and help you save time and money to secure your new home sooner.