Will changes to Capital Gains Tax affect you?
In Inner Sydney there have been a number of high-profile listings hit the market along with media speculation that foreign residents have been looking to get in front of the CGT changes and finalise a sale this financial year.
Back in May 2017, the government announced that Australia’s foreign resident capital gains tax (CGT) regime would soon deny foreign and temporary tax residents access to the CGT main residence exemption.
The original bill went through parliament but lapsed when the 2019 election was called.
According to the bill, the change was to apply from the date of announcement and properties held prior to this date would be grandfathered until 30 June 2019.
The government also amended the change to the main residence exemption to ensure that “Australian residents for tax purposes” can access that benefit.
As a result, temporary tax residents who are Australian tax residents were unaffected by the change.
In October 2019, a new bill was introduced to parliament with revisions which extended the grandfathering period from 30 June 2019 to 30 June 2020.
The changes impact certain foreign residents as follows:
For properties held before 9 May 2017: the CGT main residence exemption will only be able to be claimed for disposals that happen up until 30 June 2020, provided they satisfy the other existing requirements for the exemption.
If being sold beyond 1 July 2020: those properties will no longer be entitled to the exemption.
More detailed explanations can be found on the ATO website.
We encourage professional advice before making any investment decisions, and anyone wondering what their property is worth in 2020 can talk to us here.