Q: I am an Australian living in Hong Kong, where I have been working for the past three years. I own a property in Sydney. I have been following the Government’s plans to deny people like me the standard main resident capital gains tax exemption if I sell my house. Can you bring me up to date on this issue?
A: The Government has reintroduced a bill that removes the entitlement to the main residence capital gains tax exemption for foreign residents – but with a significant change from the original 2018 bill.
There were strong objections to the original bill from Australian expatriates, who said the change to the law would lump them in as foreign residents and deny them a tax concession that is available to every other Australian.
The updated bill, Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, reintroduced into Parliament last week, includes a measure that allows a foreign resident to access the CGT main residence exemption if they satisfy a “life events test”.
The first element of the test requires that at the time of the CGT event, the person has been a foreign resident for six years or less.
The second element is that during the period of foreign residency, one of a number of specified circumstances occurred:
- Either they, their spouse or their child (under 18) had a terminal medical condition.
- Their spouse or a child under 18 dies.
- The CGT event occurs because of a divorce or separation involving the person and their spouse.
The definition of a main residence includes a building (such as a house) or part of a building (a unit) that is mainly used for accommodation; a caravan, houseboat or other mobile home; any land immediately under the unit of accommodation; and any adjacent structures to the extent that they are used mainly for domestic purposes.