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Notice that whether or not an individual can claim the main residence exemption will depend on whether they are a foreign resident on one specific day – the day the CGT event occurs. It does not matter if for every other day the individual was a resident.

Have a look at this example from the draft EM…

Vicki acquired a dwelling on 10 September 2010, moving into it and establishing it as her main residence as soon as it was first practicable to do so.

On 1 July 2018 Vicki vacated the dwelling and moved to New York. Vicki rented the dwelling out while she tried to sell it. On 15 October 2019 Vicki finally signs a contract to sell the dwelling with settlement occurring on 13 November 2019. Vicki was a foreign resident for taxation purposes on 15 October 2019.

The time of the CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 15 October 2019. As Vicki was a foreign resident at that time she is not entitled to the main residence exemption in respect of her ownership interest in the dwelling.

Note: This outcome is not affected by either the fact that Vicki previously used the dwelling as her main residence or the absence rule in section 118-145 that could otherwise have applied to treat the dwelling as Vicki’s main residence from
1 July 2018 to 15 October 2019 (assuming all of the requirements were satisfied).

Vicki was a resident for 8 of the nine years she owned the property, and it was her “main residence” for the whole 9 years, but as she was a non resident at the CGT event she get no main residence exemption at all. No apportionment at all.

Of course it works the other way around as well. There is a second example in the EM of a resident who buys a main residence, travels overseas becoming a foreign resident, and then returns to become resident and sells the property. Even though for most of the ownership period the individual was a foreign resident, as on the day of the CGT event they were a resident, they get the full main resident exemption.

The draft law also states that:

The main residence exemption no longer applies if, at the time a CGT event occurs to part of an individual’s ownership interest in a dwelling as a result of a compulsory acquisition, they are a foreign resident.

If the deceased person was a foreign resident at the time of their death then the portion of the main residence exemption accrued by the deceased in respect of the dwelling is not available to the beneficiary. If the deceased was a resident but the beneficiary in a foreign resident, the beneficiary can claim the main residence exemption for the period of the deceased ownership, but not their ownership period.

The main residence exemption will not applies if at the time a CGT event occurs to the ownership interest in a dwelling of a special disability trust, the primary beneficiary of that trust was a foreign resident or a CGT event occurs to a dwelling while it is held by the trustee of the special disability trust after the death of the principal beneficiary and at the time of death the principal beneficiary was a foreign resident.