Main Residence Capital Gains Tax (CGT) Exemption Changes

Transitioning You Way Into Retirement

Main Residence Capital Gains Tax (CGT) Exemption Changes


Treasury has finally released the draft legislation detailing the changes proposed in the 2017-18 Federal Budget surrounding the CGT main residence exemption.

The change has been proposed as part of the Government's measures towards ‘housing tax integrity’ with a view to making home ownership more affordable and will see the removal of entitlement to the CGT main residence exemption for foreign residents. 

The Government have identified the increasing cost of housing as a significant political issue and therefore have developed a suite of policies designed to increase the number of homes available to Australians wishing to buy (or rent).  

There have been transitional provisions introduced which will allow foreign residents to still access the CGT main residence exemption provided that they held the interest in the property at 7:30pm on 9 May 2017 until the date of the CGT event.  This transitional provision ceases to be effective for sales that occur after 30 June 2019.  The rules as currently drafted appear to have a hard cut off date and no apportionment of gain for periods of when owners were tax resident.  The rules as currently drafted do not consider history of residency, rather the rules focus on the tax residency status on the date of sale.

Furthermore, the proposed rules do not allow the 6 year vacancy concession as a way to extend the ownership period if the owner is a non resident.

Also, as part of the governments policies around housing affordability and availability an annual vacancy charge will be applied to non-residents holding residential property where certain criteria are met.  Broadly, the charge will apply where the property is not occupied or genuinely available on the rental market for at least six months per year. The charge will be levied annually and will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was acquired by the foreign investor.

Should you have any questions about how these changes affect you please contact us or speak to your ESV engagement partner on 02 9283 1666.