Residency for tax purpose – Part 6
CGT changes for foreign investors
Measures applying from Budget Night on 9 May 2017
The Government will extend Australia’s foreign resident CGT regime by:
- denying foreign and temporary tax residents access to the CGT main residence exemption from 7:30PM (AEST) on 9 May 2017. Note that existing properties held prior to this date will only be grandfathered until 30 June 2019.
- applying the principal asset test on an associate inclusive basis for foreign tax residents with indirect interests in Australian real property from 7:30PM (AEST) on 9 May 2017. This will ensure that foreign tax residents cannot avoid a CGT liability by disaggregating indirect interests in Australian real property.
Charge on foreign owners of underutilised residential property
The Government will introduce a charge of at least $5,000 on foreign owners of residential property where the property is not occupied or genuinely available on the rental market for at least six months per year. This measure will apply to foreign persons who make a foreign investment application for residential property from 7:30PM (AEST) on 9 May 2017.
The charge will be levied annually and will be equivalent to the relevant investment application fee imposed on the property at the time it was acquired by the foreign investor.
This measure is intended to encourage foreign owners of residential property to make their properties available for rent where they are not used as a residence and so increase the number of dwellings available for Australians to live in.
Restricting foreign ownership in new developments to 50%
The Government will introduce a 50% cap on foreign ownership in new developments through a condition on New Dwelling Exemption Certificates. The cap will be included as a condition on New Dwelling Exemption Certificates where the application was made from 7:30 PM (AEST) on 9 May 2017.
New Dwelling Exemption Certificates are granted to property developers and act as a pre-approval allowing the sale of new dwellings in a specified development to foreign persons without each foreign purchaser seeking their own foreign investment approval. The current certificates do not limit the amount of sales that may be made to foreign purchasers. The measure will ensure that a minimum proportion of developments are available for Australians to purchase.