Australian property owners living abroad have four months to part with their Aussie homes if they want to avoid significant capital gains tax bills.
Since 1985, there has been a CGT exemption for the family home, but a federal bill that passed in early December will see the end of that exemption for those living overseas.
The law comes into play from 1 July 2020, but it might be too late for some expatriates to avoid a financial hit, Raine & Horne executive chairman Angus Raine said.
“Moreover, fears remain that many Australian expats are unaware the previous six-year temporary absence rule no longer applies and they will be caught out by the new rules when the time arrives to sell their property.
“Due to these concerns, the federal government would do well to consider a rollover concession offered to small-business owners to help smooth the CGT hit on expat property owners.”
One Australian trying to avoid the tax bill is London-based Greg Pritchard and My Truong, who only learnt about the law change on a random accountancy website, Domain reported.
The couple bought a three-bedroom apartment in 2011 in Sydney’s St Leonards. Now they are trying to sell their property to avoid an almost 20 per cent tax bill, if they sell at a later date.
“We’re Australian. We bought in good faith, and we are paying tax on the rental in Australia,” Mr Pritchard told Domain.
“We’re contributing to the economy from afar, but these changes completely disincentivise expat Australians from having a financial exposure to Australia.
“We’re being lumped in with speculative foreign investors. Why would we ever ‘financially’ return?”
Mr Raine said the hit on expat-owned property seemed strange when other property tax changes have been proposed with a grandfather clause.
“In the run-up to last year’s federal election, for example, the Opposition maintained any existing negatively geared properties would not be impacted by its contentious property tax changes. Yet, many properties owned by expats have been immediately impacted by the removal of CGT concessions,” he said.
“One option to minimise the hit on expat property owners might involve giving them a two-year deferment on paying the tax slug if they upgrade or downsize into another local property.”