As part of the 2012 Federal Budget changes, the Federal government announced amendments to the Capital Gains Tax (CGT) rules with the effect of removing the 50% CGT discount concession for non-resident taxpayers on the sale of Australian taxable property.
Effective from 8 May 2012, the 50% CGT discount is abolished for non-residents on capital gains accrued after 7.30pm (AEST) on 8 May 2012. However, the discount is still available for capital gains accrued prior to this date, provided that a written valuation is obtained by the non-resident to support the market value of the Australian taxable property as at 8 May 2012.
This means, if the property is held for more than 12 months, any gains that occur after 8 May 2012 and up to the date of sale, or the permanent re-entry date of non-resident taxpayer or expatriate will be taxed at 100% instead of the previous 50%.
Therefore, non-residents and expatriate investors now have two choices:
- pay CGT on the full amount of any capital gain made on the sale of the Australian property without access to the 50% CGT discount concession; or
- engage a certified practising valuer to obtain a market valuation of the property as at 8 May 2012 and claim partial 50% CGT discount concession.
The consequence of these changes is that non-resident taxpayers are likely to have a higher tax bill and incur additional costs.
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