close
Share with your friends

Australia – Parliament Passes Legislation Denying Foreign Residents Main Residence CGT Exemption

Australia – Parliament Passes Legislation Denying Forei

On 5 December 2019, legislation passed Australia’s Senate without amendment that contains provisions removing the Capital Gains Tax (CGT) exemption relating to a main residence for foreign residents, unless the foreign resident satisfies certain transitional provisions, or the foreign resident has been a foreign resident for six years or less and a particular ‘life event’ occurs during that period of foreign residency. The legislation now awaits Royal Assent before being enacted.

1000

Related content

flash-alert-2019-182

On 5 December 2019, Australia’s Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 passed the Senate without amendment and is now awaiting Royal Assent before being enacted.  This bill contains provisions that will remove the Capital Gains Tax (CGT) exemption relating to a main residence for foreign residents, unless the foreign resident satisfies certain transitional provisions, or the foreign resident has been a foreign resident for six years or less and a particular ‘life event’ occurs during that period of foreign residency.1

This bill replaces the previous Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No.2) Bill 2018 which lapsed at the end of Parliament in July 2019.

For a more in-depth discussion of the new provisions impacting access to the main residence CGT exemption, please see GMS Flash Alert 2019-164, 25 October 2019.

WHY THIS MATTERS

The legislation is awaiting Royal Assent.  Once enacted, it will re-introduce the controversial 2017-18 Australian Federal Budget measure to remove access to the CGT main residence exemption for individuals who are not resident for Australian tax purposes at the time of entering into the contract for sale of the property.

Despite intense lobbying by expat groups, the revamped legislation will still apply to Australian citizens or permanent residents who dispose of their Australian main residence while a foreign resident, e.g., while working overseas on secondment.

The new legislation will also apply to foreign nationals who buy a home in Australia to live in while working in the country, which they then sell after returning to their home country.  Furthermore, it will impact Australians who ordinarily live overseas and have their main residence overseas, but who come to reside in Australia for a temporary period.

Transitional Provisions and Foreign Residents

Revised transitional provisions will allow foreign residents to still access the CGT main residence exemption provided the CGT event occurs on or before 30 June 2020, and the ownership interest in the residence was held throughout the period starting just before 7:30pm (by legal time in the Australian Capital Territory) on 9 May 2017 and ending just before the CGT event occurs.

KPMG NOTE

Employers should communicate these changes to their employees who are undertaking an overseas secondment so that they can plan accordingly and not be caught out unnecessarily paying Australian CGT on their main residence.  Planning might entail, depending on the individual’s situation, deferring commencement of the secondment.  Employers should also consider the impacts this legislation will have on their population of Australian-outbound employees who have already localised overseas, or may localise overseas at some point in the future, as they may not have the flexibility to resume Australian tax residency prior to selling their Australian main residence.

Employers of expatriate workers (both into and out of Australia) should examine how or whether their assignment policies would address this legislative change, and what the cost implications for the employer might be.  Even where the assignment policy or tax equalisation policy makes it clear that any tax arising from the sale of a personal asset is for the employee’s sole account, it would be worthwhile reminding employees of this and encourage them to seek their own professional advice.

Any expatriate employees who are currently foreign resident and considering selling their main residence should obtain specific taxation advice based on their personal facts and circumstances. 

Those foreign residents who are no longer able to access the CGT main residence exemption will need to include any associated capital gain or loss from the sale of their main residence in their Australian tax returns, with consideration given to any CGT discount that may be available.  This includes individuals who acquired a main residence that is within the scope of Australian CGT on or after 10 May 2017, and have since disposed of it while foreign residents.  These individuals may need to request an amendment to a prior year’s tax return to include the resulting capital gain or loss.

FOOTNOTE

1  For the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, click here.

PEOPLE SERVICES IN AUSTRALIA

Dan Hodgson

Perth, Western Australia

Partner – People Services

Tel. +61 8 9278 2053

Mobile: +61 416 017 131

dghodgson@kpmg.com.au

 

Mardi Heinrich

Melbourne, Victoria

Partner – Deals, Tax & Legal People Services

Tel. +61 3 9838 4348

Mobile: +61 410 602 993

meheinrich@kpmg.com.au

 

Ablean Saoud

Sydney, New South Wales

Partner – Deals, Tax & Legal People Services

Tel. +61 2 9335 8550

Mobile: +61 421 052 596

asaoud@kpmg.com.au

 

Hayley Lock

Brisbane, Queensland

Partner – People Services

Tel. +61 7 3434 9176 

Mobile: +61 477 764 638

hlock@kpmg.com.au

 

Jackie Shelton

Sydney, New South Wales

Partner – Deals, Tax & Legal

Tel. +61 2 9335 8511

Mobile: +61 477 764 638

hlock@kpmg.com.au

The information contained in this newsletter was submitted by the KPMG International member firm in Australia.

SUBSCRIBE

To subscribe to GMS Flash Alert, fill out the subscription form.

©2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.

Liability limited by a scheme approved under Professional Standards Legislation.


For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal

Stay up to date with what matters to you

Gain access to personalized content based on your interests by signing up today

Sign up today