As an Australian tax resident, if you sell a property that you consider, and have elected, to be your main residence, generally the entire sale of that property is exempt from capital gains tax (CGT) so long as you have not used that property to produce assessable income.
Specifically, a property is considered your main residence and is generally exempt from CGT if:
Unfortunately, as of the 9th May 2017, as part of the crack down on foreign residents, the Federal Government restricted the utilisation of the main residence exemption for foreign residents. From this date, the main residence exemption is no longer available to someone who is a foreign resident at the time of the CGT event, subject to a transitional period.
The budget changes will apply to foreign residents as follows:
Considering the above, if you are a foreign tax resident and not eligible to claim the main residence exemption, you will need to include the full capital gain in your income tax return to be assessed at foreign resident tax rates.
Foreign Resident Capital Gain Withholding (FRCGW)
In addition, foreign residents are also subject to foreign resident capital gain withholding (FRCGW) when selling property. Specifically, when a foreign resident sells their property, the purchaser is now required to withhold an amount from the purchase price and pay that amount to the Australian Taxation Office (ATO).
The changes the government have implemented will apply to contracts entered into on or after 1 July 2017 and are as follows:
So, if you are thinking about or are currently working overseas permanently and want to sell your property while you are overseas to free up some cash, it is recommended you seek advice before selling to ensure that you are making the right decision for you. We have an experienced team at BLG Business Advisers who are happy to assist you. Take this opportunity to get in touch with us online or by calling (02) 4229 2211.