Removal of the main residence exemption for non-residents

Posted on 9 January '20 by , under tax.

The government has changed capital gains tax (CGT) rules for foreign residents under the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, which was granted assent on 12 December 2019.

The law change no longer allows foreign residents to claim the CGT main residence exemption, which will impact people who are overseas or will be going overseas and want to sell residential property in Australia while they are a tax non-resident of Australia. However, this may not apply if you were a foreign resident for tax purposes for a period of six years or less during a CGT event occurrence on your Australian residential property, and a ‘life event’ occurred, including if:

  • You, your spouse or your underaged child had a terminal medical condition.
  • Your spouse or underaged child died.
  • The CGT event involved the distribution of assets between you and your spouse because of divorce, separation or other maintenance agreements.

Individuals who will be impacted by the changes are non-tax residents who:

  • Sell a property bought after 9 May 2017 and do not experience a ‘life event’.
  • Sell property after six years of becoming a tax non-resident of Australia, regardless of a life event.

If you were not an Australian resident for tax purposes while living in your property, then it is unlikely that you will meet the requirements for the CGT main residence exemption.