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What Is The Best Way To Minimise Capital Gains Tax Liability?

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Q: I am a dual-national Australian citizen living and working in the UK.

I was born in the UK, am Australian by descent and recently returned to the UK after nine years and nine months living in Sydney. 

I sold my principal place of residence in Sydney to purchase a new principal place of residence in the UK; however, I retain two investment properties in NSW, which were purchased in 2010 and 2011.

When I dispose of my principal place of residence, I intend to be ‘living’ in Australia for more than 183 days; however, my principal place of residence will still be in the UK.

In this situation, what is the best way to minimise capital gains tax liability?

Regards, Richard

ANSWER:

Need to know

  • There are special capital gains tax rules for foreign residents.
  • An overseas property can be treated as your main residence.
  • The main residence exemption can only be claimed for one property at a time.

First, as an Australian tax resident, you pay tax on your worldwide income, with a credit for any overseas tax paid if there is a double taxation treaty between Australia and the country in question.

In your scenario, there are two issues to be addressed.

Cgt

The first relates to the sale of the Australian home and the second to the sale of the UK home.

In Australia, there are special capital gains tax rules you need to know if you’re a foreign resident.

These rules will impact you when you sell residential property in Australia.

As you have not been advised of the dates for the sale of the Australian home, you need to be aware that a capital gain on the Australian home may be taxed.

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