Non-residents may be able to breathe a sigh of relief as the widely reported changes to the main residence exemption may not be proceeding after all. The measures to change the rules announced in the 2017-18 Federal Budget have been caught up in the political turmoil in Canberra sand the governments reliance on other parties to pass legislation through the Senate.
The main changes proposed were expected to impact a variety number of situations including:
- Individuals who are foreign residents at the time a CGT on their main residence.
- Trustees of a deceased who was a foreign resident at the time of death.
The above are the two most common scenarios under which the previously eligible disposal would no longer receive the concessional treatment of the main residence exemption either in totality or a proportion of the exemption.
The law was proposed to apply to CGT events that happen on or after 7.30pm on 9 May 2017 with a transitional rule applying until 30 June 2019 for properties held by non-residents as a 9 May 2017.
With the proposed start date for the new law fast approaching combined with a variety of technical issues with the law and the upcoming Federal Election, the government do not appear to be willing or able to force through the legislative change.
The legislation passed the House of Representatives on 1 March, however, has been stuck in the Senate since then. With the Senate only sitting for 2 days in the next month, it is widely tipped that the Federal election will be called resulting in the discontinuance of the session. The precursor to the calling of the Federal election will be the Federal Budget which has been brought forward to early April and is expected to be a strong pre-election budget. The government could also use the upcoming Federal budget to restate its intention relating to the law change and reinvigorate the process.
If you have any questions on the proposed changes and your current situation or your capital gains tax position generally, please do not hesitate to get in touch with your engagement partner on 02 9283 1666.