Question:
Can you claim the main residence exemption after you move overseas?
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
The answer depends on timing, tax residency, and a few rules that catch people out.
Let’s say you have lived in your home in Brisbane for years. You get a job offer in Singapore and decide to rent the house while you are away. A few years later, you sell it. Will you pay tax on the gain?
The main residence exemption might be available in full if you are still a resident of Australia for tax purposes when you sell, even if you have been living or spending a lot of time overseas. However, being a resident at the time of sale is only one part of the test. The exemption also depends on how the property was used and whether you treated any other property as your main residence during that time.
Since 2019, people who are not residents of Australia when they sell their former home cannot claim the exemption unless a specific life event exception applies. These exceptions are limited and mostly relate to divorce, death, or terminal illness. It does not matter how long they lived there or whether they ever rented it out.
This means the timing of your sale is critical. If you plan to move overseas, it's worth considering whether to sell before you go. If you have already left, you might want to return and re-establish residency before selling, though that is not always practical. You might also simply continue to hold the property until you eventually return.
If you return and become a resident again before selling, you may be able to claim the exemption for the periods when you were a resident, and the home qualified as your main residence. You might be eligible for a partial exemption, based on how long the property was your main residence and not used to produce income.
The six-year rule also lets you treat your former home as your main residence for up to six years after you move out if you do not treat any other property as your main residence during that time, even if you earn rental income. This rule can apply while you are a non-resident, but it only helps if you are a resident again when you sell the property. The exemption is unavailable if you are still a non-resident at the time of sale.
The Tax Office can closely examine these situations and has extensive data-matching capabilities. You should check your residency status, understand the timing rules, and get professional help.
