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NONRESIDENTS - No more main residence exemption

Draft Legislation

The Government announced in the Federal Budget that changes would be made to prevent non-residents from accessing the main residence exemption for CGT purposes from 9 May 2017.

Treasury has now released draft legislation dealing with this. The way the rules will work is that a taxpayer will not generally be able to claim any exemption under the main residence rules if they are a non-resident at the time of the CGT event, even if they were a resident for some (or even most) of the ownership period.

Special amendments are also being introduced to deal with deceased estate scenarios and special disability trusts.

As announced in the Budget, someone holding property at 9 May 2017 can apply the current rules if the CGT event occurs on or before 30 June 2019. This gives non-residents some time to sell their main residence (or former main residence) and obtain some tax relief under the main residence rules.

The draft legislation also contains amendments to the rules dealing with the application of CGT to non-residents when selling shares in a company or interests in a trust. The rules ensure that multiple layers of companies or trusts cannot be used to get around the 10% threshold that applies in order to determine whether membership interests in companies or trusts are classified as taxable Australian property.

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