Owner changes from non-tax resident to tax resident, does main residence CGT exemption still apply?

Hi,

If a property owner purchased a property when they were non-tax resident, then in future becomes a tax resident, are they eligible for CGT exemption for the entire capital gain on the property? Or is the CGT exemption only applicable from when they become a tax resident?

Prior to becoming a tax resident, the property was never rented out and used as a holiday home. They also only own one property in Australia.

Thanks. I couldn't find this case on the ATO website.

 

They were a non resident which means they were living overseas at minimum.

They owned a property in australia they used as a holiday house. This says it wasnt a main residence.

So answer yes CGT will apply and no you wont get the full exemption

 

Thanks Mike. I wasn't sure if the definition of "main residence" is worldwide or limited to Australia as they meet most of the criteria listed on the ATO website <Link>

Whether they are or aren't eligible for CGT exemption, to minimise tax it would be beneficial if they move back to Australia and become a tax resident, before selling the property to upgrade. That way their capital gain is taxed at resident rates rather than non-resident rates.

 

You say "they" so referring to friends. In 90% of cases friends have half the facts.

you say they purchased the property while non residents. How could you be non resident and have a main residence in australia ? It would mean you are a tax resident.

As non residents they also lose the 50% cgt discoubt while non residents.

They could be worse off if tax rate over 32%

Best they talk to someone

 

Thanks Mike. Definitely had the intention to speak to my accountant with them. Just trying to get some background knowledge first to have a better understanding.

 

However a person who lives overseas and buys a propery there they had lived in at present could move to Australia and use the former main residence exemption. Ie 6 year rule

The govt has announced changes yet made law to terminate all such arrangements whether in or outbound

There are also specific cgt rules that may impact a person who becomes an AU resident. These will impose the value at the date they become a tax resident to future cgt. When the foreign cgt residence rules change this will become more a taxing issue than in past