Capital gains tax main residence exemption denied for foreign and temporary residents selling their property
Announced in the Federal Budget 2017/2018 that from 7.30am on 9 May 2017 individuals who are foreign or temporary tax residents will no longer be able to claim the CGT main residence exemption when selling their main residence property in Australia.
However existing properties held prior to this date will be exempt until 30 June 2019.
Furthermore the CGT withholding tax rate that applies to foreign tax residents when they sell their property will increase from 10 per cent to 12.5 per cent from July 1 2017.
Under current rules, the withholding tax applies when a foreigner sells a property worth $2m or more, but under these new guidelines announced in the budget it will now apply to properties worth $750,000 or more, with the purpose to widen the pool of revenue for the government.
The persistence of tightening the capital gains tax rules is to reduce the risk that foreign investors avoid paying CGT in Australia and overall improve the integrity of capital gains tax rules for foreign investors.
The changes in the capital gains are projected to bring the government $600 million in revenue over four years.