Expat tax still lingering
The Coalition says it is committed to a plan to change capital gains tax for expats, despite the window for its initial bill closing.
The Coalition Government's May 2017 budget included a measure to deny the main residence exemption for Australians who sell their homes while living abroad.
The change would have retrospectively denied an exemption that goes as far back as 1985, when capital gains tax (CGT) was introduced.
Since then, Australians living abroad have claimed the CGT exemption on their family home, which was allowed as long as the home was rented out for no more than six years at a time.
The proposed change would have hit expat Australians with capital gains tax if they sold their house while resident overseas — regardless of whether the home was rented out or left vacant.
Additionally, the tax bill would have dated back to the time the owner purchased the home, not when they moved overseas.
The Treasury Laws Amendment Bill 2018 has been stuck in the Senate and lapsed at the end of Parliament on July 1.
While this means the proposals will not proceed in their current format, Treasurer Josh Frydenberg said; “This remains our Government's policy”.
He gave no more information on when new legislation might be introduced, or if it would be modified from the original form.
Expats living abroad were concerned about the retrospectivity of the changes, and had rushed to find out whether they should sell their homes to avoid being hit.
KPMG tax partner Mardi Heinrich says the original bill would have seen some large Australian CGT bills for citizens and permanent residents.
“Under transitional provisions [under the lapsed law], non-resident taxpayers would have been required to sell their main residence by June 30, 2019 in order to take advantage of the CGT main residence exemption,” she said.
Ms Heinrich urged some revisions or modifications to the plan.
“The law, if it is proposed again in some form, could be changed to not be retrospective, and to exempt the person from being taxed on the gain relating to the period in which they were a tax resident of Australia,” she said.