Non-residents lose CGT main residence exemption

02 February, 2020 / In Tax Planning / By Chris Burnett

Legislation has now passed imposing restrictions to the popular and highly beneficial Capital Gains Tax (CGT) main residence exemption for non-residents. Broadly speaking, from 30 June 2020, non-residents will no longer be eligible to apply any of the main residence exemptions to reduce or eliminate a capital gains tax liability if they are a non-resident at the date of the relevant CGT event (i.e. generally contract date) – even if they lived in the house for the majority of its ownership.

Foreign residents should consult with their tax professionals and to consider their available options before the 30 June 2020 cut off.

Transitional rules for properties acquired before 9 May 2017.

For properties held prior to the 2017 budget night (9 May 2017) will only be eligible to the CGT main residence exemption if the property is disposed on or before 30 June 2020. Disposals after 1 July 2020 will simply have no access to the main residence exemption unless specified ‘life events’ occur.

Unfortunately properties acquired after 9 May 2017 will not be benefit from this transitional rule and no CGT main residence exemption can be applied even if the property is sold before 30 June 2020.

Are there any exceptions for certain non-residents?

Taxpayers that have a life event within a continuous period of six years of becoming a foreign resident will be provided an exemption. These ‘life events’ include:
(a) terminal illness of the taxpayer, their spouse or a child under the age of 18 years;
(b) the death of a spouse or child under the age of 18 years;
(c) a transfer of the relevant asset as a result of a divorce, separation or similar maintenance agreement.