Main residence exemption for foreign residents

When is the main residence exemption available for foreign residents?

If you are a foreign resident, you may be entitled to the main residence exemption from capital gains tax (CGT) for property sold after 30 June 2020, if you satisfy the requirements of the life events test.

If you are an Australian resident at the time you dispose of your property this does not affect you.

What is the life events test?

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.

What if I sold my property by 30 June 2020

You do not need to apply the life events test to a property that you:

•   acquired before 7:30 pm (Canberra time) on 9 May 2017, and

•   disposed of by 30 June 2020.

You can claim the main residence exemption if you meet both of these requirements in addition to the general requirements for the exemption.

What if I don’t have tax residency?

If you were not an Australian resident for tax purposes while living in your property, you are unlikely to meet the requirements for the CGT main residence exemption.

If you dispose of your property under a contract, the disposal time is when you enter into the contract. If there is no contract, the disposal time is when you settle.

What are the effects of CGT exemption on deceased estate?

If you are a foreign resident for tax purposes when you die, these rules also apply to:

•  legal personal representatives, trustees and beneficiaries of your deceased estate

•  surviving joint tenants

•  special disability trusts.

Source: ATO