The good news is that this tax will mainly only affect Australian residents living overseas (expats) but the consequences are huge. And most of them are unaware of it. If you know someone in this category, please bring this to their attention. The window is closing.
From 1st July this year, any expat who sells their principal place of residence (PPR), whilst living overseas, will pay capital gains tax (CGT) on it. In other words, it will be treated as an investment property, not as their PPR. This applies no matter when it was purchased.
Until now, providing their home was rented out for less than 6 years, whilst they lived overseas, it was still counted as their PPR. Legislation finally passed in December that means that any expat that sells after 30th June this year, whilst living overseas, will pay CGT on the sale price. There are a couple of exemptions for health and crisis situations, but these are very limited. This new law also affects foreign residents who purchase a PPR whilst working in Australia for a few years and then sell it after returning home.
So, consider the following. A family moves overseas in 2015 and retains their family home that they bought in 2005 for $500,000, just in case they wish to return. The job position turns out to be quite attractive, so they decide to stay. In August this year, they decide that they will stay overseas, so want to sell their home. Under these circumstances, prior to the new legislation, their home would have been regarded as their PPR and exempt form CGT. Now it will be taxed as though it were an investment property based on the increase in value from 2005. With the value today likely to be in the order of $1,500,000, that is a lot of tax.
If you are in this situation and selling your home is probable at some point in the future, consider doing it now. Homes typically don’t sell instantly. The safe window to put your home on the market probably only extends to April, 2020.
For further detail on this, please click this useful article from the ABC: https://www.abc.net.au/news/2020-01-02/australian-expats-face-tax-slug-cgt-main-residence-exemption/11836094?section=business