Understand potential capital gains tax implications: Tips for expat Australian property buyers

Take the common example of an Australian expatriate who buys a home back in Australia while still resident of another country, including for tax purposes. In this case study, the house will be rented until the expat eventually returns to Australia, when it will become the family’s home.

The capital gains tax (CGT) treatment when the home is eventually sold will be influenced by the length of time when the property was not the expat’s main Australian residence. (Main residences are exempt from Australian CGT).What would be this expat’s CGT position if he or she were to own the property for, say, 10 years and it was his or her Australian home for only the final two of those years?

Joe Galea, property tax partner for accountants Deloitte in Sydney, says a fifth of any net capital gain should be taxable.

The capital gain or loss is calculated by offsetting the so-called “cost base” against its sale price. (Very broadly, the cost base comprises the cost of buying and selling the property after allowing for any capital depreciation.)

For more tips for Australian expats buying back home this summer, download our free eBook.