New Australian Tax Laws: What Non-Residents Need to Know Before Selling Their Principal Residence.
Bondi Beach Sydney NSW Australia
We recently spoke with a former Australian tax resident family now living in Hong Kong who decided to sell their NSW Australian residence signing the sales contract as a non residents were shocked with the tax outcome.
The Foreign Resident Capital Gains Tax (CGT) legislation, effective from 30 June 2020, has significant implications for non-residents, including Australian citizens.
Previously, you could claim a CGT exemption on your main residence when selling, but under the new rules, this is no longer the case if you’re a non-resident at the time of sale. Even if you acquired the property before 9 May 2017, the exemption only applies if the sale occurred before 30 June 2020. If you sell your property while non-resident, the entire capital gain may now be taxable, potentially impacting your financial planning.
Moreover, the purchaser is required to withhold 12.5% of the sale price and remit it to the ATO, a significant cash flow consideration.
There are limited exemptions available for specific life events such as death or divorce within the first six years of non-residency. However, if you plan to repatriate and sell your property while a resident, you can still benefit from the full CGT main residence exemption.
Bronte Beach St
The NSW foreign owner surcharge land tax applies to residential land in NSW owned by a foreign person. It is in addition to any regular land tax that may apply and is currently imposed at the rate of 4% of taxable land value. It applies on an annual basis to residential land owned as at 31 December of the previous year. The NSW government has increased the land tax surcharge of 4% for 2024 to 5% from the 2025 land tax year onwards.
NSW Land Tax Surcharge applies to foreign persons including New Zealand citizens or other foreign citizens who hold Australian Permanent Residency Visas UNLESS they are in Australia for a continuous period of 200 days in a calendar year. Land Tax Surcharge does not apply to Australian citizens.
On 8 April 2024, the Treasury Laws Amendment (Foreign Investment) Act 2024 received royal assent. This Act amends the International Agreements Act 1953 (C’th) so as not to affect State Duties and Land Taxes. As a result, the position adopted by Revenue NSW in 2023 that citizens from New Zealand, South Africa, Germany, Finland, Japan, Norway, India and Switzerland are exempt from surcharge land tax has now been reversed.
Understanding these changes is crucial for protecting your wealth. If you’re contemplating selling your Australian property while living overseas, seek expert advice to ensure compliance and to explore strategies that might mitigate the impact of these tax changes.
Plan ahead, stay informed, and ensure your financial future is secure.
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