Important News for Australian Expats in Europe: Capital Gains Tax Exemptions

By David Bellingham 6 December 2019 

If you are an Australian living in Europe and you still own property in Australia, you need to read this. 

Australian property owners overseas will lose capital gains tax exemptions for the family home in June 2020.

This week the Australian Senate approved the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019. It is currently waiting Royal Assent to pass into law. 

This new law will remove the capital gains tax exemption on primary residences for Australian expats. It will wipe out the current six-year exemption.

If you are an Australian citizen and you still own your primary place of residence in Australia, you now have until the end of the current Australian tax year, 30 June 2020, to make some important decisions. 

Do you sell your property before then with the current full or partial capital gains tax exemption, or do you continue to own the property, that was once your family home and potentially be exposed to a tax liability in the future?

If the latter, it means if you sell your Australian primary residence property after 30 June 2020 while you are living outside Australia you will be liable to pay capital gain tax. 

If you decide to continue to own your Australian property, it will mean that when you return to Australia in the future and become an Australian tax resident again, for the period of time in which you were away, gains in value of the property will potentially become taxable when you eventually sell.

You will need to do a lot of meticulous planning including getting valuations at different points in time (when you purchased, when you left Australia, when you return to Australia), and keeping proof of maintenance and upgrade costs for example, as these and other factors can influence your potential future tax bill.

What is not clear yet is whether it will be retrospective and if so, how far back (capital gains tax was introduced in Australia on 20 September 1985). 

This will have important implications in your long-term planning decisions. Feel free to speak with us if you would like more information and to discuss options and do speak with your trusted adviser in Australia as well. 

Finally, at this busy time if year there will be many Australians that are not aware of this, so if you know any other Australians in Europe let them know.