As proposed in the 2017 budget, the removal of the main residence CGT exemption for tax non-residents was legislated in Dec 2019
A rather draconian rule, the effect is that if you are tax non-resident on the date you sign the sales contract on your Australian property, you will not get any exemption at all for any days you may have previously used the property as your main residence, neither will you get 6 year exemption.
There is nothing in the legislation to allow a prorate of days use, or an uplift in market value to the date of change, the whole gain is taxable. Add that to the already enacted removal of the 50% CGT discount for non-residents and property is starting to look very expensive tax wise.
There are two breathers in that
- If you owned a property before 9 May 2017, the new rules will not apply as long as you sell before 30 June 2020, or
- If you once again become tax resident before you sell, the rules will not apply. Although obviously all your other worldwide income will become taxable.
Additionally if you die as a non-resident, your beneficiaries can also not access the benefit of the days you used the property as your main residence, or the two year post death rule.
Therefore non-residents may want to consider selling before 30 June 2020, which brings into question what would you do with the proceeds?
That’s easy – as a non resident there is no Australian tax to pay on capital gains made from listed shares and franked dividends. This has always been the case. Add to that there is also no stamp duty, land tax or property agents fees and equity portfolios make a lot of sense.
I am of course happy to assist with portfolio construction for those looking to invest the proceeds from their property sales!
Lindsay 0413 952 180