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Proposed CGT main residence exemption changes likely to be dropped

CGT main residence changes likely to be droppped

Dan Hodgson and Ablean Saoud discuss proposed changes to CGT main residence exemption following the indication from Assistant Treasurer Stuart Robert that they would not be pursued further.


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Australian expats can breathe a sigh of relief following comments from Assistant Treasurer Stuart Robert which indicate the proposed changes to the CGT main residence exemption in their current form, will not be legislated.

The move follows intense lobbying and media attention from Australian expat groups on the controversial changes announced in the May 2017 Federal budget. The proposed changes would have potentially resulted in large capital gains tax bills for Australians selling their main residence whilst they are residing overseas.

Speaking at the Taxation Institute conference on 15 March, the Assistant Treasurer indicated that the Coalition government would not be seeking to pursue the passing of the Bill which was introduced into Parliament last year. The Bill is currently before the Senate, which is only scheduled to sit for two days prior to the expected calling of a federal election.

If introduced, the bill would have applied to the sale of all homes from 1 July 2019 onwards, removing the main residence exemption from capital gains tax where the property is disposed of whilst the individual taxpayer is a tax non-resident of Australia. There would also have been adverse consequences for beneficiaries of the estates of expats who pass away overseas, and divorcing couples with Family Court settlements. Of particular concern to many taxpayers was the way the legislation had been drafted, so as not to allow any pro-rating or apportionment for the part of the gain accrued whilst a tax resident.

The comments from the Assistant Treasurer are welcome, as taxpayers were looking for guidance from the government. The comments have to some extent reduced the uncertainty since the announcement of the proposals in May 2017. Many expats have been weighing up the difficult choice between selling their main residence in advance of the 1 July 2019 start date to maintain the exemption, or to take the chance that the announced changes would not go ahead.

There may be something more official in the April 2 budget announcement confirming the comments made by the Assistant Treasurer. It is still possible that a similar Bill (with some revisions) may be introduced in the future.

Taxpayers should still be aware of the ‘6 year rule’ that remains in-force for property that is rented out and was previously occupied as a main residence prior to a move overseas, and seek professional advice before leaving Australia and becoming a non-resident of Australia for tax purposes.

This article was originally published on KPMG Tax Now.

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