CGT for Non residents

Discussion in 'Accounting & Tax' started by Paul@PAS, 2nd Aug, 2017.

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Draft laws have been issued for consulatation dealing with the announcement made during the budget that non-residents would lose access to CGT concessions.

    The proposed law is far worse than I envisoned. Its a "drop dead tax" and needs careful consideration..

    1. At the TIME OF SALE if the vendor is a non-resident for tax purposes they would be incapable of access to:
    a. The main residence exemption for past property use
    b. The main residence eabsence rule allowing up to 6 yaers of exemption and
    c. The general 50% CGT concession. eg at present a valuation at 8 May 2012 is allowed to partially protect loss of grandfathered gains

    The proposed changes would NOT allow pro-rata calculations. It would apply the tax rule at the date of the CGT event and as AU property cannot be a CGT event when you depart Australian it would be all encompassing

    So if Dave owned his home for 8 years and put it on the market prior to departing to work in the USA for the forseeable future he would pay 100% CGT on the property if it sold a week later. Thats harsh.

    KPMG are suggesting it will kill the expat market and impose impossible costs on taxpayers seeking to become non-resident due to the retrospective issues with the proposed changes

    And you thought Shortens trust idea wasnt well received.................

    PWC have provided a sharp example :

    "Adriana and her husband Bernard are Australian citizens by birth. They acquired their home in Sydney in 1990 for $500,000. They have lived there their entire married lives and raised their children in the house. In mid-2019 Adriana is offered a job working full time in New Zealand for a contract period of five years. As their children have grown up and moved away, she and Bernard decide to relocate themselves to New Zealand to take up this opportunity and leave Australia for this purpose on 31 December 2019.

    "In preparation for their departure, Adriana and Bernard put their Sydney house on the market. After a period of negotiation, they sign the contract to sell the property on 15 January 2020 for $2.5 million. Assuming that they became non-residents of Australia on 1 January 2020 (which is likely) they will pay tax on the full $2 million capital gain, despite only having been non-residents for two weeks at the time that they sell."

    This harsh example applies to homes acquired from budget night (May 2017) BUT it is only a temporary concession: PWC said.....

    The government's amendments on the capital gains tax apply to properties purchased from budget night, May 9. Existing properties are grandfathered, but only until June 30, 2019. After that date, the capital gains tax family home exemption is abolished for foreign tax residents, whether they are Australian citizens, or not
     
    Parkzilla, Nodrog and Terry_w like this.
  2. Abooking

    Abooking Well-Known Member

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    Skewering expats – you'll lose the capital gains tax exemption on your home

    Now its in the SMH.

    I can't believe this nanny state government. If I own my PPOR and have been paying taxes all my life in oz and decide I want to retire in another country I then have to change my tax status to be a non resident and thus lose my CGT exemptions.... Its simply unfair.

    Does it mean that any retiree living abroad basically should put his/her PPOR on the market and sell before 30th June next year?
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes. Or maybe hold it until after they return. In which case its still 100% taxable (under the existing post 8 May 2012 AU property CGT rules) but pro-rata recognition of prior residency SEEMS to be permitted but I cannot yet confirm this. The document isnt in the public domain (yet) and I want to see the full copy. The 2019 rule could also take it away !!)
     
  4. Laken

    Laken Active Member

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    Dear Paul, thanks for posting this.
    Indeed this is just another money grab intent on making those who are citizens fork out more and more for poor policy decisions elsewhere. Who knows what they will come after next. One to watch.
     
  5. Mike A

    Mike A Well-Known Member

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    the utopian dream of most politicians would be to make the country like north korea where a few rule and live off the exploits of everyone else.
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Enough have tried to use the Canberra ATM on the hill for their own gains or to throw everyday aussies under a bus. Personally I want a CBA ATM installed here at the office.
     
    Last edited: 4th Aug, 2017
  7. James Hill

    James Hill Active Member

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    When would we know if this becomes actual law, next year?
     
  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The media will keep you informed - You can bet on that