Foreign residents that have sold property after 30 June 2020, may be entitled to the main residence exemption from CGT if they meet the criteria of the life events test.
What is the life events tests
You satisfy the requirements of the life events test if both of the following are true when you dispose of your residential property:
• you were a foreign resident for tax purposes for a continuous period of 6 years or less
• during that period, one of the following occurred:
– you, your spouse or your child under 18 had a terminal medical condition
– your spouse or your child under 18 died
– the CGT event happened because of a formal agreement following the breakdown of your marriage or relationship.
If you satisfy both these criteria and meet the general requirements for the exemption, you can:
• claim the main residence exemption
• use the exemption as a reason to vary the capital gains withholding that would otherwise apply to your property.
Only foreign residents who sold property prior to 30 June 2020 may be eligible for the main residence exemption.
If a foreign resident taxpayer doesn’t meet the life events test, they aren’t entitled to any main residence exemption, even if they were a resident for some of the ownership period.
How else can foreign residents access the 50% CGT discount?
When a foreign or temporary resident sells Australian property, the 50% CGT discount will apply to part of their capital gain when either of the following situations:
• they acquired the asset on or before 8 May 2012
• they had a period of Australian residency after 8 May 2012.
If either of these apply, you may pro rata a portion of the discount for the number of days your client was an Australian resident after 8 May 2012.
How is CGT discount calculated for a foreign resident?
The CGT discount will be calculated on a pro-rata basis for the period of residency relative to the overall ownership period.
If you purchased a property after 8 May 2012 and remain a foreign or temporary resident for the entirety of ownership, you will not be entitled to any CGT discount upon the sale of your property.
Need more information?
See also our article on Main residence exemption for foreign residents
Source: ATO
Disclcaimer: The information provided within this article is general information only. None of the comments in these notes are intended to be advice, whether legal, financial product or professional. You should obtain specific advice regarding your particular circumstances from a tax or legal professional.
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