Last chance to access CGT main residence exemption for foreign resident

On 12 December 2019, parliament passed the legislation Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 to remove the CGT main residence exemption for foreign residents with very limited exceptions. This is a draconian measure and completely removes the main residence exemption if an individual is considered a foreign resident at the time of the sale of the main residence. This means that as from 1 July 2020 the sale of a main residence by a foreign resident will be subject to tax.

What are your options?

Foreign residents may still access the CGT main residence exemption under the transitional provisions if, the property was acquired before 9 May 2017 and a contract of sale is entered into by 30 June 2020 (settlement can occur later). We have assisted several clients with modeling the options available to them and have in some cases identified more than $1 million of potential tax savings. Your options are as follows:

  1. Keep the house past 30 June 2020
  2. Sell the house by 30 June 2020 to a related trust or company
  3. Keep the house past 30 June 2020 and become an Australian tax resident.

What are your key considerations?

Considering which option to undertake is complicated and is affected by a myriad of factors personal to you. For example, you may need to consider whether you are entitled to a full or partial main residence exemption, the cost base of the property, potential future capital proceeds for the property, the duty implications of disposing the property to a trust or company, the potential increase in valuation of the property, surcharge land tax and your future Australian residency status. 30 June 2020 is approaching fast. You have a limited window to consider your options and potentially access significant future tax savings. If you would like us to assist you with modeling the different options so you can make an informed decision before 30 June 2020, please contact Kelly Partners Tax Consulting.