Non Resident CGT Changes

Discussion in 'Accounting & Tax' started by Paul@PAS, 23rd May, 2018.

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  1. Mike A

    Mike A Well-Known Member

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    Question 48,49,50 ? It cant be any clearer to be honest.
     
  2. FredBear

    FredBear Well-Known Member

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    Thanks Paul for your response. Where do you find this information? I have been following this on the Parliament House website (aph.gov.au -> Parliamentary Business -> Bills and Legislation, also under the Senate section look at the Dynamic Red, Journals of the Senate, and Daily Summaries) plus I have been in correspondence directly with a number of Senators. From these sources it looks like it should still come before the Senate which commences next week - no information there about any re-introduction.
    Most other expats I know are unaware of this new law - I followed the budget last year when this was announced and thought no, this won't apply to me, I am Australian, not a "foreign investor" - my family has been in Australia since 1792, and am distantly related to the Prime Minister (grandma was a Turnbull). Only a couple of months ago I saw a Sydney Morning Herald article which highlighed the impact on expats and made me realize how bad this is for us.
    For us the scenario is:
    -current PPOR bought in Sydney 1997
    -lived there full time until 2006
    -rented out and reoccupied a few times until 2014
    -now 4 years since last occupied by us. Currently non-residents as living abroad.
    So if we sold and settled by 30th June 2019 -> no CGT as PPOR and still within 6 year rule
    Sell after 30th June 2019 while still non-resident -> full CGT for whole period since 1997.
    Easy for the government to say just move back and become residents again - what if one of us dies or gets ill and can't travel, or life takes us in a different direction and we need to sell for some reason - this is like a death tax or exit tax from Australia. There are some expats who are going to be really badly burned by this.
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Consider whether to take pre-emptive action
     
  4. FredBear

    FredBear Well-Known Member

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    Options are:
    - Sell before 30th June 2019 (don't really want to, this is our family home which we put a lot of work into and where our children grew up and would like to keep the door open to moving back)
    - Sell to a trust or company, but both of these would cost big $$$ in NSW stamp duty etc, and does this really do the trick?

    Any other options?
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Reset cost base perhaps. This may involve moving in again and out again which may not be practical but could save you enough to justify.

    Selling to a resident trust could mean 50% cgt discount going forward but some serious issues to consider.
     
  6. Paul@PAS

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

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    Where is the property ?
     
  7. Paul@PAS

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

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    The Bill has been withheld AFTER it was approved by both houses and before assent. It wont be given assent they said BUT they could if they wanted I believe as it still hasnt been officially withdrawn according to the APH website. It is part of broader review of all residency and non-residency rules changes by Treasury. Announcements are coming --- next day, week, month or next Budget I cant tell you.

    You can assume the rules will be applied as all parties seem to have agreed to the key issues. If laws are modified I question if a new bill will be retrospective or not BUT it is in the present sessions so maybe its permitted. Hard to advise on something that seems to be law but isnt (yet). This aspect of our tax laws is really unworkable.

    PS The law has no care for your citizenship. Just tax residency. Those are the laws under review. The Govt wants to modernise the residency tests to address people who float about without defined residency for periods of time and I suspect it will impact MORE people to find them non-resident than the other way about. I cant see us adopting the same laws as Eritrea and the USA and only taxing non-citizens.

    One of the key elements to the laws is that it ONLY impacts if you sell. If you return and wait the matter is ignored excepting the loss of CGT discount which is already existing law.

    The issue of ending a main residence exemption on departure is the key sticking issue and why the laws are scheduled for change. I dont think that part will change. Just the issue of restrospective application to loss of the main residence concession as if it never applied and I agree its very (!!!!!!!!!!) unfair. Allowing it to the date of departure or a 6 month period after departure makes sense. I hope to see that modified. But...Not all expats vote so it may not be a electorate concern.

    One often ignored way to avoid the issue is to sell within 6 months of moving out if you move into a owned property overseas. The 6mth overlap rule in s118.140(1)a
     
  8. FredBear

    FredBear Well-Known Member

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  9. FredBear

    FredBear Well-Known Member

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    Thanks Paul for your response. You wrote "The Bill has been withheld AFTER it was approved by both houses and before assent." According to the Senate documents it is still on the current notice paper under Orders of the Day point 24. Currently tonight the Senate is right now debating point 5 on the Orders of the Day. The document is here:
    Current Notice Paper – Parliament of Australia
    At the rate the Senate debates it will take 2 -3 days to get to point 24. I'm curious as to where your information is coming from, as it is different to the APH website which is supposed to be the official source. There is no mention in Hansard of this bill ever being approved by the Senate - it is still on the second reading. Am I misunderstanding something?

    Absolutely agree the current situation is unworkable with laws that may or may not come. Our tenants vacated our PPOR some weeks ago, PPOR is now empty, any new tenants want a 12 month lease, which would take us beyond the 30th June 2019 cut off day. Finger poised on the sell button, but don't want to push it unless it's really necessary.

    Regarding residency/non-residency, if Australia has a DTA (tax agreement) with the other country in question then the determination of residency is set out in Article 4 of the DTA. I understand that you can be a tax resident of one or the other countries but not both at the same time. Then you need to look at the tax residency rules of both countries to see how they interact. 183 days actually present in the country in the last 12 months is a common rule to say you are a tax resident.
     
  10. Mike A

    Mike A Well-Known Member

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    Tie breaker provisions come into play many times
     
  11. Paul@PAS

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

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    I dont visit the APH website each day. It was (and remains) showing as passed by both houses and after its abrupt withdrawal (by press release only) the APH tracking has been curiously absent since March. I havent even been able to determine if its a dead Bill (which the expires at the end of the life of the current house or next general election of the house) and a new bill replaces it after Treasury got involved in the tax review.

    I know the Treasurer has yet to schedule proposed changes to residency taxation rules and this was all involved.

    Looks like its back. Thats actually NOT a good thing. Treasury may have suggested that the law should proceed. I guess it must then go back to the Senate to be passed again ? I hope its back for revision rather than needing to be re-approved. Its already been moved as passed by the Senate after the House of Reps. I hope there may be changes rather than a formality of being passed again? Senate can make changes and then it will revert to the House of Reps.
    What I hope to see is that the Amendments section of the APH Bills tracking shows some change. Given Hanson didnt previously raise any suggested amendments it does not look good.

    This also means the start date may still stand.

    I have discussed this matter with a tax counsel in a professional body who agreed that seems their view on this too. He was hoping the Treasurer would have made a announcement before the Bill reappeared.
     
  12. FredBear

    FredBear Well-Known Member

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    Upodate - the bill is still on the Senate "Order of Business" document, now at number 25 on the list. Currently Senate is debating bill number 7. At this rate it will be Christmas before we know what is happening to this!
     
  13. Mike A

    Mike A Well-Known Member

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    Will have a new prime minister by then and probably get repealed
     
  14. Paul@PAS

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

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    I was thinking same. Only if a new election is called. All Bills terminate and cannot become retrospective. If PM changes they stay in play.
     

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