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Matthew Gilligan

Australian Budget Hits Offshore Property Investors

The recent Australian Budget announcements include a significant rule change which will affect any New Zealanders whom hold property investments in Australia. Specifically, the 50% discount which was available when calculating capital gains tax on property that has been held for more than 12 months is removed.

By way of background, most readers will be aware of the fact that Australia has a capital gains tax regime. This applies to all property within Australia, whether or not the owner is resident there. Broadly speaking up until 8 May 2012 offshore investors were subject to the same rules in relation to capital gains tax as Australian resident investors. In particular, where an investor owned a property personally or via a trust they could generally qualify for a 50% discount on the capital gains tax applicable to the sale of a property if it had been held for longer than 12 months.

From 7:30pm, 8 May 2012, the 50% discount is removed for offshore investors with application to capital gains accrued after this date. The result of this is that if you have a property you acquired prior to 8 May 2012 any gain that accrued up until that date still qualifies for the 50% discount, but gains from that date do not. At this stage we are not aware of how pre 8 May and post 8 May gains are going to be calculated, but presume it will be incumbent upon the investor to determine that. Accordingly, foreign investors will be incentivised to get optimistic valuations for properties placing a value on them at 8 May 2012. We will follow this aspect of the rules closely and report once more is known.

As always, if you have queries in relation to capital gains tax, please contact us.

Matthew Gilligan
Matthew Gilligan
© Gilligan Rowe & Associates LP

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

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Hi Juliette, Just want to say thank you for all the work you have done and advice you've given. Definitely tricky during these Covid times and still getting the job done. Want to wish you and your team good fortune, and hopefully in the future work together to get another property.

- Arthur W, September 2021
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