Australian Expatriates turn away from Australian Property
30 June, 2018
Like most Australians in Singapore I am a very property minded investor. There is just something secure and trusting about Australian property and it is because of these reasons that it has been extremely hard for myself and thousands of other Australian Expatriates to accept that investing in Australian property whilst living abroad may no longer be a logical investment.
The Australian government has made it perfectly clear that they do not want Foreign Investors buying property in Australia and have introduced unattractive tax legislation to prove it:
1. The removal of the CGT 50% discount for non-residents
2. The ending of the 6 year CGT Main Residence Exemption for non-residents
3. The withholding taxes on property sales for non-residents
4. The increase in certain State Land Taxes for non-residents
5. The general reluctance by Australian banks to lend to non-residents
Is it worth it?
It is due to the unattractive tax treatment on foreign investors that has made Australian Expatriates question the purpose behind their property portfolio.
If you are seeking to purchase property in Australia as a foreign investor then it is crucial that you establish the reasons behind the purchase.
Is the property for:
1. Capital Gains
2. Retirement income
3. Retirement home or future residence
If you already own property in Australia or are seeking to buy new property in Australia it is also crucial that you ask yourself the following questions before you move forward as a non-resident:
1. How long will I be overseas?
2. Will I retire in Australia?
3. What are my long-term plans?
Things are not as as simple as they once were and Australian property may not be the answer it once was.
Important: If you have moved offshore within the last 6 years and own a Main Residence that has experienced a significant amount of growth since the purchase date then it is absolutely crucial that you seek Financial Advice from an Australian Specialist as soon as possible. The changes to the Capital Gains Tax on Main Residence properties will take effect from June 30 2019.
CGT Main Residence Exemption
If you have a main residence or family home in Australia and as long as you do not claim an alternative house as your primary residence, then you are entitled to continue to claim your previous home as your primary residence for capital gains tax purposes for up to an additional six years (6 year temporary residence rule). This was great news for most Australian Expatriates because if your property is considered a Main Residence then you will not be subject to a Capital Gains tax should you choose to sell that property within 6 years.
The proposed change to the law implies that anyone who sells their main residence whilst being a non-resident for Australian tax purposes will lose ALL entitlements to the CGT main residence exemption, and will be subject to capital gains tax on the full amount of any capital gain. This is irrespective of how long you have owned your home, and how long you have lived overseas. Sell your main residence whilst being a non-resident for tax purposes and you will lose all your entitlements to the CGT main residence exemption.
The government has grandfathered the changes such that properties held on 9 May 2017 that classify as a main residence will not be impacted if they are sold before 30 June 2019.
Should Australian Expatriates sell their property before 30 June 2019?
The answer to this question will be determined by the long term plans of the owner. Speak with an Australian Specialist before making any decision.
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Nothing on this website should be considered financial advice of any kind. Please consult your professional adviser before making any investment decision. Any content on this site relating to tax matters is for general information only, may not be up to date, and should not be considered tax advice of any kind.