Australian expats lose capital gains tax exemptions

THE FEDERAL Government has made a very significant change to capital gains tax (CGT) affecting ex pats, but it’s likely there are many Australians living overseas who are still completely in the dark about it.

Put simply, the change entails the CGT exemption for the Australian family home, which has been in existence for 35 years, being taken away from expat – or non-resident – Australians if they sell the property while living overseas.

Currently the exemption applies so long as the home was rented out for no more than six years at a time, but from July 1 this year the new changes will take effect.
Depreciation - Houses=

What are the changes?

The change to CGT means expats seeking a principal place of residence exemption must sell before June 30 or hold the property and wait until they return home to live in it again before selling. If they don’t, they risk paying a potentially hefty CGT bill on their home.

If the property was purchased before May 9, 2017 expats can sell before June 30 this year and avoid CGT, but if the property was purchased after May 9, 2017 and sold while living overseas CGT will still have to be paid, as there is no principal residence exemption.

The legislation, which seems to have been rushed through after both political parties previously promised they would exclude expats from the changes as it was unfair, will also apply retrospectively.

That means capital gains will be taxed for the entire time the property has been owned, rather than just for the time the occupant has lived overseas, which could become very expensive for those that bought their properties as far back as 1985, with property prices having risen very significantly.

The changes to CGT will also affect migrants who buy a home in Australia to live in while they are here, and then sell after returning home.
Depreciation - Houses

What impact will the change to CGT have on expats?

The change will only affect expats who sell a home in Australia they have previously lived in while they are living overseas.

It’s difficult to determine exactly how many expats will be impacted, but it could be tens of thousands to hundreds of thousands.

And then there is not only current expats to consider, but those moving overseas in the years to come, particularly in an increasingly global economy where many people are going abroad to work.

Those that are affected will be significantly disadvantaged. Experts agree it’s an unfair tax to drop on Australians who have purchased in good faith, believing their home would be exempt from CGT, and continued to contribute to the Australian economy through taxes on their homes if they are rented out.

It should be noted that there are some concessions for the application of CGT to the homes of expats selling while overseas, with an exemption applying for life events such as a terminal medical condition, death or divorce.

What should expats do?

It appears this change to CGT has been brought in without much fanfare to even alert expats of its existence.

There will likely be many people caught unawares and potentially sell while overseas without realising the tax laws have changed, incurring a significant CGT bill.

If you’re an expat, the first thing you need to do is get educated on the change in the CGT rules, and then determine the best course of action for your circumstances.

You’ll need to do so quickly, with the deadline to sell (the contract date) being June 30 this year.

It’s a good idea to seek professional advice on the costs involved in your circumstances and whether you’re better off holding or selling.

Impediments to waiting until you return home include that your move may be permanent, you may be unable to hold the property financially, or you may be returning to a different city than the one which you left.

For those returning, you must be genuinely returning to Australia and can prove that you have quit your overseas job, cancelled a property lease and taken your children out of their overseas school, for example.

For those who do have to pay CGT, there could be issues in determining the correct tax liability because those who have purchased up to 35 years ago may not have kept proper records.

Capital gain is calculated using the original cost base, which includes expenses related to the property purchase such as buying costs, holding costs and renovations, as well as the cost of the property itself.

This may lead to expats selling their home while overseas being charged more CGT than they would have, if the proper records had been retained.

Construction Cost Estimating: A Case Study

construction cost estimating

Construction cost estimating examples Case Study

Client: Commonwealth Bank/Ecove Group

Project description: Site 3, Sydney Olympic Park, NSW Depreciation Quote Schedule

This development comprised a 25-storey tower, housing two retail tenancies and 267 apartments over four basements. A two-storey commercial pod, consisting of six commercial tenancies, including associated site works, also formed part of the development.

Washington Brown provided pre-contract cost planning services to the developer, as well as a full cost management auditing service to the financier during the construction phase.

We also provided monthly contractor payment recommendations and reporting to the financier, along with variation assessment, cash flow analysis and contractor reviews.

Washington Brown worked to ensure the builders maintained the lump sum contract price and the financier’s/developer’s interests were maintained at all times.

Work out how much you save using our free property depreciation calculator or make it happen and get an obligation free quote for a depreciation schedule now.

This blog is an extract from CLAIM IT! – grab your copy now!

Using a Construction Cost Estimator

construction cost estimator

Whether you’re building a block of residential units, a commercial or business centre, a high-rise tower or developing a subdivision, it is a must that you are in control of the project cost. We all know that effective cost management is critical to a project’s success.

Washington Brown has extensive experience in all major sectors of the property industry over the last 30 years. This expertise and knowledge is fundamental when assisting our clients in completing their projects on time and on budget.

We have been involved in a wide range of development projects where we have acted as the cost controller on behalf of lending institutions. Our best-practice cost planning service ensures you get accurate cost and construction information for every stage of your project.

We offer specialist advice in the following nine broad areas:

  1. Financial auditing of projects Depreciation Calculator
  2. Development monitoring
  3. Procurement
  4. Construction-contract review and assessment
  5. Feasibility studies
  6. Sustainability advice
  7. Risk identification and management
  8. Value engineering
  9. Tender review and selection.

Washington Brown’s ongoing project monitoring, coupled with our robust reporting systems, helps us detect issues early, giving you time to address them quickly and in the most cost-effective way.

We can monitor, analyse and report on:

We have developed a cost report for the project monitoring that easily identifies the current project financial status, cash flow analysis, variation assessment and risks.

If you need help minimising the risk of overruns on your next construction project – talk to our construction estimating team today.

This blog is an extract from CLAIM IT! – grab your copy now!

The ATO is Wrong & we are going to Prove It!

ATO is Wrong<

Why the ATO is wrong

The other night in bed….I was reading an article on the ATO Website (yes I’m a bit weird), titled “Where do you get the construction cost information?”.

I was a little shocked when I read the last paragraph that stated “Note: Remember to obtain your construction costs report as soon as possible as these reports can take a long time to prepare.”

At first I thought, wow even the ATO recognises that it’s not always that easy and fast to: Depreciation Calculator

  1. Get all the information required to prepare a report (Including any work carried out by the vendor or previous vendor if handed over at settlement
  2. Liaise with the tenant and property manager to get access
  3. Inspect the property
  4. Compile the data
  5. Prepare the actual depreciation schedule

The other issue is that Quantity Surveyors get inundated around June and then are quieter from November to February.

So, Washington Brown is committed to proving the ATO is wrong and here’s how.

We have a 7 day guarantee!

This means: after we have received all of the required information AND completed the inspection for the property we will have your report completed within 7 days!

The key here is do it now! – You’ll get your report within 7 days guaranteed if you order your report here now!