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  • Foreign residents and main residence exemption

    There are special capital gains tax (CGT) rules you need to know if you're a foreign resident. These rules will impact you when you sell residential property in Australia.

    In the 2017–18 Budget, the government announced that foreign residents will no longer be entitled to claim the main residence exemption when they sell property in Australia. The relevant bill was introduced to the Parliament but it lapsed when the 2019 election was called. This bill has not yet been reintroduced into the Parliament after the 2019 election.

    If the bill is reintroduced and passed, and you are a foreign resident when a CGT event happens to your residential property in Australia, you may no longer be entitled to claim the main residence exemption. This will apply to you:

    • when you use the exemption as a reason for a variation to your foreign resident capital gains withholding rate
    • when you lodge your income tax return. You must declare any net capital gain in your income. You can claim a credit for the foreign resident withholding tax paid to us.

    When the change will apply

    According to the original bill, the change will apply retrospectively to foreign residents, as follows:

    • For property held prior to 7:30pm (AEST) on 9 May 2017
      • the exemption will only be able to be claimed for disposals that happen up until 30 June 2019 and only if they meet the requirements for the exemption
      • disposals that happen from 1 July 2019 will no longer be entitled to the exemption.
       
    • For property acquired at or after 7:30pm (AEST) 9 May 2017
      • the exemption will no longer apply to disposals from that date.
       

    Note: This change will only apply if you are not an Australian resident at the time of the disposal (contract date).

    If you weren't an Australian resident for tax purposes while living in your property, you are unlikely to satisfy the current requirements for the main residence exemption.

    If you are a foreign resident when you die, the changes will also apply to:

    • legal personal representatives, trustees and beneficiaries of deceased estates
    • surviving joint tenants
    • special disability trusts.

    See also:

    Last modified: 05 Aug 2019QC 55771