CGT main resident exemption: Changes for non-residents

In 2017, The government announced changes to deny foreign residents access to the capital gains tax (CGT) main residence exemption.

The draft has not yet been passed through the senate and there are several changes  being proposed. Under current law all taxpayers including foreign residents are entitled to claim CGT exemptions provided they use their property as the principle place of residence. The main residence exemption also extends to deceased estates, where deceased used the property as principle place of residence, as well as to special disability trusts.

The impact of the new law being proposed  will be that a foreign tax resident who enters into a contract to sell a property after 9 May 2017 would not be able to claim main tax resident exemptions. This rule may also impact Australian citizens who leaves Australia for a short period of time with the intention to return. However, they would be considered as a foreign resident for tax purposes.

All the proposed changes made by the government including the removal of the main residence exemption for foreign residents, non-resident CGT withholding tax and removal of the 50% CGT discount for foreign residents reflects the strong measures taken by the government to stabilise Australia’s housing market.