The consequences of post-departure home sales

Leaving Australia after residing here for an extended period and owning a home entails careful consideration if you plan to sell your property. Selling your home after departing Australia and becoming a foreign resident for tax purposes can result in the loss of any capital gains tax (CGT) exemption on your property, with limited exceptions.

 

Understanding the impact

This stringent rule can have severe financial repercussions. Furthermore, you may forfeit the full benefit of the 50% CGT discount on any assessable capital gain, particularly if you were a foreign resident during your ownership period. Capital gains would also be subject to higher non-resident tax rates.

 

The timing factor

If you sign the sales contract while still in Australia but settle the transaction after leaving the country, you are exempt from these consequences. CGT implications are determined based on when the contract of sale is entered into, not the settlement date.

 

Practical solutions

This scenario offers practical solutions to circumvent potential issues. Strategies such as adjusting the asking price to prompt an agreement before losing residency status can be effective. Extreme measures, like returning to Australia as a tax resident for the sale, may also be considered, especially in joint ownership situations.

 

Exceptions and considerations

Selling while a foreign resident may be advantageous if there is a capital loss on the property, allowing you to leverage it for other purposes. Exceptions to the CGT exemption rule exist for foreign residents of less than 6 years facing circumstances like divorce, separation, family illness, or death necessitating the sale.

 

Conclusion

Losing your CGT exemption on your home is a significant concern. Before selling your Australian property post-departure, contact us to navigate potential liabilities effectively and avoid any unnecessary financial burdens down the track.