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Hi @claire_s
Foreign residents for tax purposes are only liable for capital gains on Australian real property. Australian residents are liable for capital gains on their worldwide assets. This means you're taken to have acquired the property as your asset on the day you become an Australian resident for tax purposes. Property is generally liable for capital gains tax. However, you can use the main residence exemption and six year absence rule. This means the property will be exempt for CGT while it was your main residence. Where the property is used to produce income, you'll need to know the market value at the first day it produces income (for you, is rented). This is the first element of your cost base. The valuation can be done by any registered valuer, so long as they use the International Valuation Standards Council definition of market value. They should be familiar with market trends. For this reason, it will be more appropriate for an Italian valuer to obtain that market value. It's important to keep in mind you can only choose to claim main residence exemption for one property at a time. This means when you purchased your new main residence, your Italian property will be liable for capital gains from that time onward, or your main residence here will be liable for capital gains on the time you treat the Italian property as your main residence. You get to decide. Because you've owned the property for more than 12 months, you're an individual, and the CGT event is happening now, you'll be eligible to use the discount method to calculate your capital gain.
For further reading, check out website:
Changing residency
treating a dwelling as main residence after moving out
Who may undertake market property valuation
Discount method
All replies
Hi @claire_s
Foreign residents for tax purposes are only liable for capital gains on Australian real property. Australian residents are liable for capital gains on their worldwide assets. This means you're taken to have acquired the property as your asset on the day you become an Australian resident for tax purposes. Property is generally liable for capital gains tax. However, you can use the main residence exemption and six year absence rule. This means the property will be exempt for CGT while it was your main residence. Where the property is used to produce income, you'll need to know the market value at the first day it produces income (for you, is rented). This is the first element of your cost base. The valuation can be done by any registered valuer, so long as they use the International Valuation Standards Council definition of market value. They should be familiar with market trends. For this reason, it will be more appropriate for an Italian valuer to obtain that market value. It's important to keep in mind you can only choose to claim main residence exemption for one property at a time. This means when you purchased your new main residence, your Italian property will be liable for capital gains from that time onward, or your main residence here will be liable for capital gains on the time you treat the Italian property as your main residence. You get to decide. Because you've owned the property for more than 12 months, you're an individual, and the CGT event is happening now, you'll be eligible to use the discount method to calculate your capital gain.
For further reading, check out website:
Changing residency
treating a dwelling as main residence after moving out
Who may undertake market property valuation
Discount method
Very helpful, thank you.
My real estate agent in Italy has no idea about who to contact for a retrospective valuation - it's not a commonplace practice over there. I will try to find an Italian valuer through other avenues, but would I be allowed to use a registered valuer in Australia if all else fails?
Hi @claire_s,
Thank you for getting back to us. A registered valuer in Australia may not be aware of market trends in Italy. Using someone in Italy to complete the appraisal would be recommended. There is information on our website on what is considered for market value purposes.
You can look at the link on real property and market valuations below.
Generally we do not recommend external websites, however I did locate The European Group of Valuers Association (TEGoVA). The website mentions, enhances European valuation practices including:
- a common European Valuation Report for Residential Property.
They also list 37 countries including Italy, you may wish to google them to view associations and organisations they recommend for each country.
Link-
Valuations for real property.
All the best.
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