Dramatic Shift in Aussie Expats Tax Free Home Exemptions
There was a dramatic earthquake for Australian citizens who live overseas on 8 February 2018.
Quietly, while the media focused on the Barnaby Joyce quagmire, Australian citizens abroad started to lose up to 45% of their accumulated property wealth. The Australian Government introduced to the House a Bill to remove the capital gains tax (CGT) exemption for the sale of a main residence on 8 February.
Other proposed reforms are a 25% increase in withholding tax (from 10% to 12.5%) on properties sold, reducing the threshold for overseas resident sellers to $750,000. And a new “property vacancy fee” (read tax) if your property is vacant for 183 days.
What does this mean for Australian Mums and Dads who live overseas?
If passed in its current form, this will mean that if you sell you main residence you will be liable for full tax on the profits from the sale. And full tax at non-resident tax rates – starting at 32.5% from the first dollar. And – there is NO concession for how long you owned the property, lived in it, or the date you left the country.
This means if (after 30 June 2019) you owned your home since 1990, leave the country and sell it tomorrow the full amount of the profits are subject to non-resident tax, and there is zero capital gains tax concession available for non-residents. So if you made more than $180,000 in profit you are up for a 45% tax pill. There is a transitional grace period to 30 June 2019, so this comes into effect from July 2019 – meaning those who owned homes prior to budget night (9 May 2017) have until the end of the tax year 30 June 2019 to sell their home without Australian tax impost.
From 1 July 2019 – expect to pay full tax on the profits from your family home. And definitely do not die overseas, the main residence exemption will not be available to any beneficiary if you die as a non-resident for tax purposes.
For further information or a confidential chat, you are welcome to contact me at [email protected] or (+65) 8328-0293
Brent Allcock is an Authorised Representative (BDA100051668) of Chartwell Associates Pte Ltd a licensed Financial Advisor (MAS Licensed Adviser No. 100027). With over 11 years specialising in Expat issues in Asia and over 27 years’ experience in financial services.