Moving overseas and selling your home during COVID? Watch out for tax!
Photo Credit Shona Stephenson
A recent ruling has confirmed that the Australian Taxation Office (ATO) is unable to extend the main residence capital gains tax (CGT) exemption to expatriate Australians who have been unable to sell their Australian home due to COVID-19 restrictions.
Since 9 May 2017, foreign residents, such as expatriate Australians, have been denied access to the main residence CGT exemption. However, there have been two scenarios whereby an expatriate Australian could still pursue a tax-free sale of their former Australian home.
The first scenario for a tax-free sale existed under transitional provisions that allowed affected expatriates to ignore any capital gain if they sold their former Australian home on or before 30 June 2020. As it is read, this exemption is unfortunately not available for any property disposals made after 30 June 2020.
The second scenario for a tax-free sale, which is still in force, is available for expatriate Australians who have been foreign residents for 6 years or less, but only if the sale of their former Australian home is connected with a relationship separation, terminal illness or death.
Recently, by way of a private ruling application, an expatriate Australian requested the ATO’s discretion to apply the main residence CGT exemption notwithstanding they satisfied neither of the above two scenarios. The applicant’s request was on the basis that they were not aware of these changes to Australia’s tax laws, coupled with the downturn in the real estate market due to COVID-19, hampering their ability to sell their property before the 30 June 2020 deadline.
In this ruling, the ATO has confirmed that it does not have the authority to disregard any capital gain made by an expatriate Australian, on the sale of their former Australian home, for such extenuating circumstances.
Although the COVID-19 lockdowns have created significant difficulties for everybody affected, no tax-grace is available from the ATO for expatriate Australians to disregard their capital gains on the sale of their former Australian home, beyond the exemption scenarios already available.
If you’d like some assistance with your taxation, reach out to Dean Crossingham,
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