The federal government’s rule changes for foreign investors will also apply to some Australian citizens who don’t reside in the country.
Last year, a withholding tax of 10% on the sale of a home to foreign investors was introduced for properties selling at $2m and above. The latest budget papers announced the threshold would be dropped to $750,000, and that the tax would be increased to 12.5% to improve “the integrity of capital gains tax rules for foreign investors.”
However, some expats who do decide to sell their homes once they’ve moved overseas will also be required to pay a significant portion of their capital gains to the Australian Taxation Office (ATO) when they sell and will lose their main residence capital gains tax exemption.
An ATO spokesperson confirmed that Australian citizenship doesn’t necessarily preclude expats from being required to pay the foreign investment charges.
“In some cases an Australian citizen who lives outside Australia may not be a resident for Australian tax purposes, particularly if they have been living outside Australia for an extended period,” the spokesperson said. “In these cases, the Australian citizen may be a foreign investor for the purposes of these provisions and will not be granted a clearance certificate from the ATO if they apply. They will then have tax withheld on the sale of their property.”
According to the ATO, Aussies who move overseas and do not establish a permanent home in another country are “generally” Australian residents for tax purposes. However, citizens who exit the country permanently would be considered foreign residents and would be among those whose withholding tax charges are expected to provide the government with $581m in revenue from 2017-18 to 2020-21.
A spokesperson for the Treasury said there was “no separate estimate of the gain to revenue attributable to Australian citizens”. Hence, individuals returning to Australia and re-establishing their tax residency would not be affected when they sell.
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