{"id":354,"date":"2020-02-19T20:24:19","date_gmt":"2020-02-19T20:24:19","guid":{"rendered":"http:\/\/www.trakaccountants.com.au\/blog\/?p=354"},"modified":"2021-07-05T23:43:45","modified_gmt":"2021-07-05T23:43:45","slug":"cgt-the-family-home-expats-and-foreigners-excluded-from-tax-exemption","status":"publish","type":"post","link":"https:\/\/www.trakaccountants.com.au\/blog\/cgt-the-family-home-expats-and-foreigners-excluded-from-tax-exemption\/","title":{"rendered":"CGT & the family home: expats and foreigners excluded from tax exemption"},"content":{"rendered":"\n

CGT and the main residence exemption<\/a> <\/h2>\n\n\n\n

\n\nCapital gains\ntax (CGT) applies to gains you have made on the sale of capital assets. Unless\nan exemption or exclusion applies, or you can offset the tax against a capital\nloss, any gain you made on an asset is taxed at your marginal tax rate. The tax\ntriggers when a \u2018CGT event\u2019 occurs. For residential property, the \u2018CGT event\u2019\nis generally the date the contract is signed.\n\n<\/p>\n\n\n\n

The main residence exemption prevents CGT\napplying to your family home (the home you treat as your main residence). If\nthe home was your main residence for only part of the time you owned it, or if\nyou use your home to produce income for example, you use part of the home as\nbusiness premises or rent out part of the property), then a partial exemption\nmay be available.<\/p>\n\n\n\n

In\naddition, if you move out of your home and you don\u2019t claim any other residence\nas your main residence, then you can continue to treat the home as your main\nresidence for up to six years if you rent it out, or indefinitely if you don\u2019t\nrent it out (the \u2018absence rule\u2019).<\/p>\n\n\n\n

Previously,\nthe main residence exemption was available to individuals who were residents,\nnon-residents, and temporary residents for tax purposes. <\/p>\n\n\n\n

The new rules<\/a><\/h2>\n\n\n\n

The new\nrules exclude foreign residents from accessing the main residence exemption and\napply to CGT events that occur from 9 May 2017 onwards.<\/p>\n\n\n\n

Under the\nnew rules, if you are a non-resident for tax purposes at the time you sell your\nmain residence, you will no longer be able to access the main residence\nexemption and you will need to pay CGT on any gain you make (subject to\ntransitional rules and an exclusion). These new rules apply regardless of\nwhether you were an Australian resident for part of the time you owned the\nproperty and no apportionment applies – the exemption simply does or does not\napply depending on your residency status for tax purposes at the time the CGT\nevent is triggered.<\/p>\n\n\n\n

However, if\nyou are a resident of Australia at the time of the CGT event, then you may be\nable to access the main residence exemption, even if you have been a\nnon-resident for some or most of the ownership period. For example, an expat\nwho maintains their main residence in Australia could return to Australia,\nbecome a resident for tax purposes again, then sell the property and if\napplicable, access the main residence exemption (the new rules contain\nprovisions that will deny the exemption where someone attempts to avoid the new\nrules by deliberately structuring their affairs to access the exemption \u2013 for\nexample, transferring the property to a related party).<\/p>\n\n\n\n

The new\nrules do not impact on Australian tax residents. <\/p>\n\n\n\n

The transitional rules until 30 June 2020<\/a><\/h2>\n\n\n\n

Transitional rules are in place for non-resident taxpayers who would have been able to access the main residence exemption prior to the changes. The transitional rules enable someone who held property continuously from 9 May 2017 to apply the existing rules if the CGT event occurs on or before 30 June 2020. This gives non-residents a limited period of time to sell their property and obtain some tax relief under the main residence rules.<\/p>\n\n\n\n

Exclusions to the new rules<\/a><\/h2>\n\n\n\n

If you\nwould have been able to access the main residence exemption under the prior\nrules, and have been a foreign resident for six years or less, there is a\nlimited exclusion to the new rules where certain \u2018life events\u2019 occur. <\/p>\n\n\n\n

A \u2018life\nevent\u2019 is generally:<\/p>\n\n\n\n