CGT Main Residence Exemption and Moving Overseas

What is the CGT main residence exemption?

Broadly, the CGT main residence exemption allows homeowners to pay zero capital gains tax (CGT) where profits are made upon selling their primary place of residence (their home).

The CGT main residence exemption rule also provides a partial exemption from CGT if the dwelling was the individual’s main residence for only a part of the ownership period i.e. if the property was used to produce assessable income like rent.

In scenarios where individuals do not treat any other home as their main residence they may be able to treat their previous home as their main residence for up to 6 years beyond when they moved out if their main residence is rented out or an unlimited amount of time if the home is left vacant.

What’s changing for foreign residents?

In the 17-18 Federal Budget the government announced changes to prevent Australian home owners who are deemed to be foreign residents at the time of sale from accessing the CGT main residence exemption. The change is not yet law at the date of this blog. If the law is passed the exemption can still be accessed if you sell your home on or before 30 June 2019 so long as the property was not purchased after the 9th of May 2017.

If you acquired the property after that date you will be subject to the new rules regardless of whether or not you sell before 30 June 2019 (assuming the law is passed).

What defines a foreign resident?

For the purpose of the legislation ‘foreign resident’ means someone who is not a tax resident of Australia. Foreign residents or those living outside of Australia including Australian Citizens and Permanent Residents should seek professional advice as to whether or not these changes affect them.

Pro tip:

If the law passes, and you are already or it is likely that you will become a foreign resident in the future it may be worthwhile considering selling your primary residence before 30 June 2019 rather than after, to benefit from the main residence exemption.

Further reading

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Author: Joe Siragusa
Email: joe@faj.com.au