In the last few Parliamentary sessions before the Christmas break the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 passed both houses and received Royal Assent. It received Royal Assent on 12 Dec 2019.
This means that non-Australian residents selling their former home in Australia will have a short transitional window – to 30 June 2020 – to sell their property to still be able to claim main-residence exemption against their Australian taxable gain for the period they lived in the property before they ceased to be Australian-residents.
Sales of properties by non-Australian-residents after 30 June 2020, will, except in very rare cases, attract no Main Residence Exemption (MRE), resulting in a higher taxable gain and therefore tax bill in Australia.
Simon and Ann are Australian-nationals. They lived in Australia for many years before taking up an employment opportunity in the UK. They moved their family to the UK and have settled there and intend to stay indefinitely. They therefore wish to sell their former home in Australia.
Simon and Ann’s home was purchased in Jan 2010 for $850,000, they lived in the property as their only or main residence until Jan 2017 when they moved to the UK. The property is now worth $1.3m. The gain is therefore $450k.
They have not yet bought a home in the UK, having lived in a series of rental properties since their arrival in the UK, but intend to use the sales proceeds of their Australian home to fund the purchase of a new home in the UK.
a) Simon and Ann sell their home on 1 Jan 2020
They have held the property for 10 years, they lived in it for 7 and had no other Main-Residence so can continue to claim MRE in Australia for up to 6 years from when they ceased to live there. The entire gain is exempt from tax
b) Simon and Ann sell their home on 1 Jan 2021
The transition period for the new legislation has expired. They will not be able to claim any MRE in Australia – the entire $450k gain is taxable.
*Note the example only considers the Australian tax implications of sale there may also be tax impacts in the country of residence.
While returning and becoming Australian-resident before sale of the property will allow MRE to be claimed – we would note that a temporary return to sell the Australian home could trigger other tax complications.
For comprehensive advice on this matter, contact Joanne Lamberth in our Sydney office: firstname.lastname@example.org