CGT

Hi all,

Steve has asked me to clarify some of the issues raised.

The Bill initially introduced (8/2/18) to remove the CGT exemption for non residents lapsed when the 2019 Federal Election was called.

Unfortunately the Bill was reintroduced on 23/10/19 and was given royal assent on 12/12/19

Key points are:

– The measures apply from 9th May 2017;

– Individuals who are foreign residents at the time of the CGT event (contract of sale), are not entitled to the CGT main residence exemption;

– There are limited exemptions  available where the taxpayer satisfies a ‘life events test’ (has died, divorice or terminal medical condition applies) whilst a foreign resident and they have been overseas for less than 6 years;

– There is transitional relief for taxpayers who held the property before 9th May 2017 and the property is sold on or before 30th June 2020

Therefore, absence rule does not apply if property sold whilst a non resident of Australia.

If sold when a non resident, you lose all concessions including the valuation when first rented to inflate the cost base (Sec 118-192)

It appears however if you return to Australia and become a resident, you will still get the concessions.

Below is an extract from the legislation – link provided for those playing at home to make it easier to read rather than my sloppy copy and paste in a forum post.

https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r6439_ems_e7d52c30-b2e6-4db3-9830-e2956635ae28/upload_pdf/720135.pdf;fileType=application%2Fpdf

Example 1.2—Main residence exemption denied Vicki acquired a dwelling in Australia on 10 September 2010, moving into it and establishing it as her main residence as soon as itwas first practicable to do so. On 1 July 2018 Vicki vacated the dwelling and moved to New York. Vicki rented the dwelling out while she tried to sell it. On 15October2020Vicki finally signs a contract to sell the dwelling with settlement occurring on13 November 2020. Vicki was a foreign resident for taxation purposes on 15 October 2020. The time of CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 15 October 2020. As Vicki was a foreign resident at that time she is not entitled to the main residence exemption in respect of her ownership interest in the dwelling.
Capital gains tax changes for foreign residents19Note: This outcome is not affected by:•Vicki previously using the dwelling as her main residence; and •the absence rule in section 118-145 that could otherwise have applied to treat the dwelling as Vicki’s main residence from 1July2018 to 15 October 2020(assuming all of the requirements were satisfied).Example 1.3—Main residence exemption applies Amita acquired a dwelling in Australia on 20 February 2003, moving into it and establishing it as her main residence as soon as it was first practicable to do so. On 15 August 2021Amita signs a contract to sell the dwelling and settlement occurs on 12 September 2021.Amita used the dwelling as follows during the period of time for which she owned it:•residing in the dwelling from when she acquired it until 1October2007;•renting it out from 2October2007 until 5 March 2011 while she lived in a rented home in Paris asa foreign resident (assume the absence provision applies to treat the dwelling as her main residence);•residing in the dwelling and using it as a main residence from 6March 2011 until 15 April 2012; •renting it out from 16April2012 until 10 June 2017 while she lived in a rented home in Hong Kong as a foreign resident (assume the absence provision applies to treat the dwelling as her main residence); and•residing in the dwelling from 11 June 2017 until it was sold.The time of CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 15 August 2021. As Amita was an Australian resident for taxation purposes at that time (as she had re-established her Australian residency) she is entitled to the full main residence exemption for her ownership interest in the dwelling as it is, or is taken to be, her main residence for the whole of the time that she owned it.Main residence for part of the ownership period1.30The partial main residence exemption generally no longer applies if, at the time a CGT event occurs to the ownership interest in a dwelling, the individual that owns it is a foreign resident. [Schedule 1, item11, paragraphs118-185(3)(a) and (b)]1.31An individual who has been a foreign resident for six years or less may beable to access the partial main residence exemption if certain life events occurduring that period of foreign residency.[Schedule 1, item11, paragraphs118-185(3)(a) and (b

Cheers,

Mark Unwin

Generally there is no time frame in the law to re establish your PPOR.  You just need to be able to prove you have lived there.

You may not have to move into the property to qualify for the PPOR concessions depending on your history of the property and whether it still qualifies as your PPOR under the 6 year absence rule.  If it does, then you don’t have to move back into it, you just need to sell it at the time you are a tax resident of Australia.

Cheers,

Mark