The Government is currently considering removing the main residence exemption for taxpayers who are foreign residents when they sell their property.
Many taxpayers who move overseas, rely on the 6 year absence to rule to sell their property which was their principal place of residence, tax free. Some taxpayers also rely on the first income rule to receive a partially taxed capital gain. Under this proposed bill, disposals under both methods would be subject to full capital gains tax and there is also no capital gain discount regardless of the holding period. This may also mean that foreign tax rates apply, which are significantly higher than resident tax rates.
There are some exceptions to this rule and some transitional arrangements. The most significant of these is that properties held at 9 May 2017 will be exempt from these rules if the property is sold before 30 June 2020.
We recommend that if you are a non resident considering selling a property that was your principal place of residence, or are considering moving overseas and currently own your principal place of residence, you should contact us to discuss how the new rules may affect you.
Author: Peter Gill – this article appeared in our November 2019 newsletter