The Australian government has reintroduced draft legislation to remove the Capital Gains Tax (CGT) main residence exemption for foreign residents.
Where previously the sale of a person’s home was ordinarily exempt from CGT in Australia, these gains may be taxed in full for foreign residents. The changes could result in a significant tax exposure for current and future globally mobile employees, and in turn, their employers where there are tax equalisation policies in place.
Triggering capital gains in Australia
If this legislation is passed, it would apply retrospectively from 9 May 2017. As such, expatriates and other foreign residents who have sold a property after this date whilst on assignment may have unintentionally triggered a Capital Gain.
The changes will have a significant impact on globally mobile employees and their employers alike. Employers should inform all current and future assignees of the changes to avoid any of their employees inadvertently giving rise to capital gains tax exposure in Australia.
Understanding the complexity
If you would like to discuss the full implications of these changes and the tax planning opportunities available, please contact Thomas Isbell or George Bendall from Grant Thornton Australia, alternatively speak to your local Grant Thornton office.