Helping Australian Expats Navigate 1 July 2020 Tax Changes

16 March 2020

Australian expats need to be aware that if they decide at any time to sell the family home after 1 July 2020 they will be impacted by new Capital Gains Tax (CGT) laws.

These changes present interesting times for all parties in the sales transaction process.

Steve Fisher, Managing Director (Accounting) at JemmesonFisher, a legal and accounting firm specialising in real estate, says from 1 July 2020, landlords who sell their family home in Australia while they are residing overseas will not be able to claim an exemption from CGT. 

“The CGT exemption on the sale of family homes has been in place since this tax was introduced back in 1985. While the CGT exemption will remain in place for those who sell their family home while they are living in Australia, it will soon be removed for Australian expats who sell their property while they are living and working overseas,” Fisher says.

“It’s not the preferred strategy to ‘farm’ your rental database for potential sales. However, if your landlord might now be considering the sale of their property, you really should be their first point of contact,” Fisher says.

“Send your Australian expats an email notifying them of the upcoming changes and let them know that you are ready and able to assist should a sale be required before 30 June 2020.”

Fisher advises agents to reach out to their clients to help them better understand the implications of the CGT changes.

Fisher suggests agents take the following steps to keep clients informed.

“Review your rental database and identify your overseas landlords. Exclude any overseas landlords if you know that they have never used the rental property as their family home.

Tax Exemptions on Return to Australia

So, what happens to the CGT exemption if an expat moves back into their Australian family home?

“As soon as an expat is considered to be an Australian tax resident, they will qualify for the usual CGT exemption that applies to every other Australian taxpayer,” Fisher says.

“So it’s not a matter of whether they relocate before or after 1 July 2020 or how long they live in the property on returning. The test applied by the ATO is the tax residence status of the person at the time of selling the home.

“The ATO has four different tests which it applies to determine residency status. Of course, all of these tests have rules and exceptions, and exceptions to those exceptions. So, it’s important to obtain advice from a qualified financial advisor who can take all [individual] circumstances into account.”

While the prospect of increased sales is welcome, selling may not be the right option for everyone and it’s important for agents to act in the client’s best interest.

Be A Trusted Adviser

Lynette Malcolm, Partner at Chadwick Real Estate and REINSW Residential Sales Chapter Committee Member says the upcoming tax changes have resulted in more sales activity.

“The government did speak about bringing these changes into effect a number of years ago and there was a preliminary rush of activity then, and we’re seeing it again now,” Malcolm says.

Malcolm says while the prospect of increased sales is welcome, selling may not be the right option for everyone and it’s important for agents to act in the client’s best interest.

“We sent out notifications to our clients about three weeks ago about what will take place with the changes,” she says.

“Our job is to be a trusted adviser. If clients are overseas, reach out to them and give them the information they need to make the right decision for them.”

Malcolm says she is encouraging clients to get professional tax advice before making any decision as “one size doesn’t fit all”.

You can find out more about the CGT changes at the ATO website.

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