Main residence and non residents

Peter Cramer

Watch out if you own a house and plan to leave Australia and become a Non Resident!

There are proposed new laws before Parliament that make a Non Resident who sells their previous main residence in Australia fully subject to Capital Gains Tax, even if they lived in it for many years.

Example:  You bought a house in 2002 and lived it for 16 years until 2018, then:

  • you get an overseas career offer of a lifetime or
  • you decide to go back to the mother country or
  • you meet the love of your life and go to live overseas or ….
  • So you move and live overseas – permanently.
  • you sell your house back in Australia in 2020 (as you are permanently living overseas) and are now a non-resident.
  • the house is sold for $400,000 more than you paid for it.

The proposed new laws provide that the sale of the house is to be fully subject to Capital Gains Tax!   The whole $400,000 will be subject to CGT!

No allowance for the time you lived in it and no allowance for the time you were an Australian resident!

(Note: If you sold it when you were still a resident of Australian there would be no CGT in this example).

There is one “get out”.  If you owned the house as at 9/5/17 and sign a contract to sell it before 30 June 2019 the rules won’t apply.

Whilst there won’t be many people that fall into this position, you may know someone who is considering leaving Australia permanently (or already has) and who intends to retain their house – perhaps to rent it out.  They are facing a serious CGT exposure that they probably don’t realise.

If this proposal becomes law and if the non-resident doesn’t want to pay tax, they will need to sell the house before 30 June 2019 (or never sell it).