Aussie expats could be slugged with tax bills after exemption changes


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Aussie expats will be stripped of their tax exemption for a main residence after the Australian Senate voted yesterday to pass the Treasury Laws Amendment Bill 2019.

The changes, first announced in the 2017/2018 Federal Budget, form part of the government's plan to combat Australia's housing affordability crisis.

The bill has received bipartisan support, for reasons unclear.

aussie expats could be caught out by cgt changes

Senator Carol Brown says Labor supports the bill, but admits it won't do much to solve the problem for which it was designed.

The move's also drawn heavy criticism from tax experts.

"The main concern that we have is the retrospective nature of the bill which potentially could trigger capital gains tax as far back as September 20, 1985, when the CGT regime was introduced," says Brett Evans of Atlas Wealth Management.

Evans warns expats could be caught out unaware of the changes, exposing them to significant tax liability.

"While some of the damage can be mitigated by the Australian diaspora seeking Australian expat tax and financial advice, our concerns are for those Australian expats who are unaware of these changes and act on the assumption that the main residence exemption is still in place for Australian expats."

There doesn't seem to be much an expat can do to avoid paying capital gains tax if they sold their property on or after May 9, 2017.

Expats who live overseas and own a former principle place of residence will now have two options: sell their property before the June 30, 2020, to retain either a full or partial entitlement to the Main Residence Exemption, or retain the property until they return to Australia and choose to become a resident for tax purposes.

Simone Gielis from Etax Accountants tells Money "the only caveat to avoiding the changes and retaining the main residence exemption applies to those expats who have been foreign residents for six years or less" and they have had one of the following life events:

  • A terminal medical condition to themselves, their spouse or child under 18,
  • Death, or
  • Divorce or separation.

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David Thornton was a journalist at Money from September 2019 to November 2021. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.

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