Deprecated: Methods with the same name as their class will not be constructors in a future version of PHP; Site has a deprecated constructor in /home/s1013042/public_html/skillsforhire.com.au/application/libraries/Site.php on line 2
Deprecated: Methods with the same name as their class will not be constructors in a future version of PHP; Permission has a deprecated constructor in /home/s1013042/public_html/skillsforhire.com.au/application/libraries/Permission.php on line 3
Deprecated: Methods with the same name as their class will not be constructors in a future version of PHP; Auth has a deprecated constructor in /home/s1013042/public_html/skillsforhire.com.au/application/libraries/Auth.php on line 5
A PHP Error was encountered
Severity: Warning
Message: count(): Parameter must be an array or an object that implements Countable
As previously highlighted, the Federal Government announced in its May 2017 Budget that was seeking to remove the main residence exemption for temporary and foreign resident taxpayers and subject these properties to Australian capital gains tax (CGT).
Under the existing six-year rule, a property can continue to be exempt from CGT if sold within six years of first being rented out. The exemption is only available where no other property is nominated as the main residence. When the dwelling is reoccupied as the main residence, the six-year exemption resets. So another six years of exemption is available from the date it next becomes income producing.
The changes are:
denying foreign and temporary tax residents access to the CGT main residence exemption from 7:30PM (AEST) on 9 May 2017;
existing properties held prior to this date will be grandfathered until 30 June 2019;
increasing the CGT withholding rate for foreign tax residents from 10.0 per cent to 12.5 per cent, from 1 July 2017; and
reducing the CGT withholding threshold for foreign tax residents from $2 million to $750,000, from 1 July 2017.
These rules will impact Australian citizens and permanent resident visa holders who are either on existing overseas assignment or are considering an overseas assignment as their family home may now become subject to Australian CGT. Given the capital growth experienced in the Australian residential property market over the last decade, this make act as a significant impediment for Australian nationals undertaking long term foreign assignments.
I have summarised the impact of these changes in the attached summary and have attempted to illustrate the impact with various examples.
The Government will use the foreign resident capital gains withholding regime as the enforcement mechanism.
Please forward this article to any of your friends or colleagues who may be impacted by these proposed changes.
If you have any questions, please do not hesitate to contact me.