Important changes to Capital Gains Tax (CGT) are afoot that will affect Australian citizens and permanent resident visa holders.
There are currently around 1.2 million UK citizens living in Australia and it’s a popular destination for expats with a shared language, beautiful beaches and tempting climate, but the tax changes afoot could discourage others from making the move.
Draft legislation is with the Australian Treasury, with the opportunity to comment having closed on 15th August.
If adopted, from 9 May 2017 the Australian Federal Government will subject foreign and temporary tax residents to CGT on their main residence.
This will overturn the CGT exemption they have previously enjoyed.
Existing properties held before 9 May 2017 will be grandfathered until 30 June 2019.
These changes could have a significant impact on your finances
Other important changes are set to modify the foreign resident capital gains withholding payments regime from 1 July 2017 to:
- Increase the withholding rate to 12.5% (from 10%)
- Reduce the withholding threshold to $750,000 (from $2m)
Nationwide the average price for a residential property is currently $699,700 however in major cities such as Sydney average prices are well over $1.1m.
The moves also come at a time when tougher lending regulations have been imposed by the Australian Prudential Regulation Authority and increased mortgage rates have followed.
And it’s not only expats who may be affected
Australian citizens living abroad also need to take note of the changes.
If they set up a permanent home in another country they could be treated as foreign investors in Australia and required to pay the new tax on their Australian property.
If you’d like to discuss how to prepare for these changes or any other aspect of private client or international tax, call us on 01761 241 861 or email us today. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.