Main Residence Exemption and Foreigners

Individuals who are foreign residents at the time a CGT event occurs to a dwelling (or for a compulsory acquisition a part of a dwelling) in which they have an ownership interest are not entitled to the CGT main residence exemption.

The Bill making this change is before the Parliament (Treasury Laws Amendment (Reducing Pressure on Housing Affordability No. 2) Bill 2018).

Not much has changes…

Vicki acquired a dwelling in Australia 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 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:

  • Vicki previously using the dwelling as her main residence; and
  • 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).

The grandfathering is still the same. If you owned the property before 10 May 2017 and sell it before 30 June 2019 you still get the MRE. It looks like there will be lots of properties on the market in early 2019.

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
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