Australian Government to lay siege on Principal Place of Residence

[4MyEgo]

Hi Guys   I raised this matter in an previous post, and.........well now it appears it's going to happen very soon, so those of you who have your principal place of residence (home) back in Australia and are Non Residence for tax purposes, I would strongly suggest that you contact your accountants a.s.a.p. as Capital Gains Tax on your principal place of residence is about to increase to 45% from 1 July 2019, now if you think that's unfair wait......................., because there's more to come, i.e. the Capital Gains Tax applies from the very first day you purchased the property, not when you moved overseas, so it will be 45% Capital Gains Tax from the very first day you purchased your principal place of residence (home), and no 50% CGT discount.   Hopefully this post will save a few Xpat Non Residents a little fortune as they have time to either get back and sell their principal place of residence (home) before the 30th June 2019 or from selling it from here, but firstly, make sure you talk to a qualified accountant as I am not qualified in this area and am just copying and pasting what was forwarded to me out of interest, because I know "labelled" Non Residents who own property back in Oz, do get and are further getting the rawest of deals yet to come.   Copied and pasted extract of an email below, sent to me today, and If this post is going to save you a few bucks, give me a like as it will make the effort all worth it for me.   You’re probably busy doing what you do best so we won’t keep you long. Recently you reached out to us about your Australian taxes and since the 2018 Australian financial year just ended, we think now's the perfect time to let you know about a bunch of recent tax rules that have the potential to affect you.   I'm Shane Macfarlane, the founder and tax advisory partner of Expat Tax Services. My goal is to update you about new and recent Australian tax rules that may affect you and many other Australian expats living and working around the globe. By providing you with valuable information about these rule changes over the coming few weeks, you'll be able make timely decisions so that you're not caught unawares and so that you're not slugged with high Australian taxes unnecessarily because of a lack of planning.   And this week, we start with a look at some harsh new rules seeking to scrap the main residence capital gains tax exemption on the sale of your family home!   Main residence CGT exemption to be scrapped - Australian government lays siege to expat family homes! Your family home has always been your castle, but with recent changes to Australia's capital gains tax main residence exemption for non-residents, your castle is under serious attack by the Australian Taxation Office (ATO).  Public policy in Australia has always been that Australians should not have to pay tax on any capital gains made on the sale of their family home (providing certain criteria were met). However, for Australian expats and non-residents generally, that's about to change!   What's changing?  Back in early 2017 we warned our clients about the Australian government's 2017/2018 budget proposal to scrap the main residence exemption for Australian expats (and other non-residents) with a harsh new rule slated to kick in from as early as 9th May 2017. Basically, the new rule means that if you sell your family home while living overseas as a non-resident, you may be taxed on every dollar your home has increased in value since the day you purchased it.  Under the old rules, 100% of those gains would have been totally tax-free! Worse still, your gains will be now be subject to tax at Australia's punitively high non-resident tax rates of up to 45%.   A small window of hope Although these harsh new rules apply from 9th May 2017, the Australian government has applied a grace period for existing properties, but only until 30th June 2019.  So if you're like the majority of our clients and you own a family home back in Australia, there's still hope because you will have a small window of opportunity to sell your home prior to 30th June 2019. After that date, if you are a non-resident, the main residence capital gains tax (CGT) exemption on the sale of your family home will be abolished, regardless of whether you are an Australian citizen or not! Now, it might seem like 30 June 2019 is a long way off, but remember that real estate markets can be seasonal. How will your property perform in the summer, autumn and winter of 2018/19?  If your property will do better in the spring – there’s only one season left to go! How will this affect me? We feel that these new rules are inherently harsh and unfair as we believe that it will force many long-term Australian expats into making a major life and financial decision much earlier than planned. For example, we believe many Australian expats will be forced into: ·         selling their family homes much earlier than planned (before 30th June 2019) ·         cutting short their overseas expatriate role and returning home to Australia much earlier than planned; or ·         deferring the sale of their family home until they eventually return to Australia, even where this is not convenient. Additionally, these new rules are so punitive for non-residents that overseas and Australian employers may find it more difficult to hire and relocate Australians to work overseas.   It's also worth noting that given recent increases in Australian property price over the last few years, particularly in Sydney and Melbourne, Australian expats may have accrued significant gains in Australian property.   Here a couple of case studies to explain further Example 1 – CGT applies   Sarah acquired a dwelling on 10 September 2010 for $200,000. As soon as practicable she moved in. On 1 July 2018 Sarah got a job in New York and moved out but unfortunately she could not sell her property in time before she left Australia to take up her new role.  On 1 August 2019, while resident in New York, she signed a contract for the sale of her house at a sale price of $1,200,000. The whole profit (totalling $1,000,000) on the sale is subject to capital gains tax at Australia's non-resident tax rates of up to 45%.  Had she sold the property before 30 June 2019, the whole of the profit would have been tax-free. It doesn’t matter that the house was Sarah’s main residence for the vast majority of the time that she owned her home, CGT applies on the full amount of the gain. Example 2 – CGT doesn’t apply Jessica bought her home in February 2003 and moved straight in.  She sells the house in 2020, but between those two dates she spent considerable periods overseas, and when she did so, she rented her house out. From October 2007 until March 2011 she lived in a rented apartment in London.  She came back and lived in her house from March 2011 until she went to Hong Kong until 10 June 2017. While she was in Hong Kong she rented her house out. When she came back in 2017 she lived in her house until she sold it in 2020. There is no CGT on the sale because at the time Jessica is resident in Australia.   What this means for you If you're an Australian expat, contemplating an overseas posting, or if you run a company that has employees overseas, then it's important to understand how these new rules introduced into parliament will affect you. In fact, we believe more than 90% of our expat clients will need to consider, sooner rather than later, whether or not to sell the family home. If you think you fall within that 90%, we highly recommend that you book a tax consultation with us at (below) page to learn how these changes may affect you.  Book an Appointment  Because when someone is laying siege to your castle, to be forewarned is to be forearmed.   What's up next week? Next week, we'll take a look at how recent tax changes to Foreign Resident Capital Gains Withholding Tax will impacts expats who are considering selling their Australian property.   If you have any questions in the meantime, please hit the reply button and drop me a line.   Until next week, Shane Macfarlane CA, FTA, B.Bus. | CEO & Founder Wherever you are, whatever you do . . . we’ve got your Australian tax needs covered www.expattaxes.com.au AU: +61 1300 762 001 |  Asia: +852 8199 9021 |  US: +1 857 574 5700 |  UK: +44 20 8144 9320         To make sure you keep getting these emails, please add [email protected] to your address book or whitelist us. Not interested in keeping up to date with Australia's tax changes and want out of the loop? Unsubscribe. Our postal address:  c/- 19480/Expat Tax Services, GPO Box 1171, Sydney, NSW, 2001, Australia Liability limited by a scheme approved under Professional Standards Legislation. Australian Registered Tax Agent No. 25220543, Chartered Accountants & Taxation Advisors IMPORTANT The information transmitted is for the use of the intended recipient only and may contain confidential and/or legally privileged material. Any review, re-transmission, disclosure dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited and may result in severe penalties. If you have received this e-mail in error please notify the sender on +61 1300 762 001 or +613 9016 2608 (if calling from outside of Australia) and please delete all copies of this transmission together with any attachments.

Edited September 25, 2018 by 4MyEgo

[ezzra]

Good piece of information, i'm sure many will find the above helpful and act accordingly, having said that, trust to Aussie government to keep fing ways to make expats life more and more difficult and costly, i don't know why successions of Australian governments has this huge bug up it's arese when it comes to expats, like this inexplicable urge to punish us all....

Edited September 25, 2018 by ezzra

[ubonjoe]

This is a duplicate of a topic you posted previously where you have posted the same info in a post here.

No need for a new topic. This topic