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COVID AND CAPITAL GAINS

Newbie

Views 1055

Replies 5

I am an Australian who has been working overseas for the past 10 years and in the current scenario feel compelled to relocate temporarily back to Australia to ride out the COVID threat. My concern is that I am completely invested in the share market rather than the property market to support my non-residence status but now if I return to Australia it will be at a time when all of my investments have lost most or more than the gains that they have made. I am concerned that if I return to Australia it will be reflected as a Capital Gains event and I will then be forced to pay substantial capital gains as the various businesses recover. I am still going to be employed by my overseas employer, just temporarily working remotely and intend to return once this stabilises. My employer has agreed but requested that I move out of the Villa I occupy during this time until I return. Is the ATO planning to make any concession for the COVID situation and temporary returning Australians for CG tax? Is there any way I can ask for a ruling in this regard as I want to avoid a CG hit for something that is out of the ordinary.

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 4

Hi @Starcraft,

 

Thank you for reaching out to us. I understand your concerns with the COVID 19 pandemic and these unprecedented times. If you return to Australia and are a resident for tax purposes, you will only be declaring a capital gain or loss when you dispose of the asset. It is not a capital gains tax event to own a capital asset.  

 

If you sell or dispose of the asset whilst an Australian resident for tax purposes, then you will need to declare the capital gain or loss on your Australian Income tax return. You may have further tax obligations in the country you purchased the capital asset in. 

 

Hope this helps,

 

Regards,

JodieR.

5 REPLIES 5

Most helpful response

ATO Community Support

Replies 4

Hi @Starcraft,

 

Thank you for reaching out to us. I understand your concerns with the COVID 19 pandemic and these unprecedented times. If you return to Australia and are a resident for tax purposes, you will only be declaring a capital gain or loss when you dispose of the asset. It is not a capital gains tax event to own a capital asset.  

 

If you sell or dispose of the asset whilst an Australian resident for tax purposes, then you will need to declare the capital gain or loss on your Australian Income tax return. You may have further tax obligations in the country you purchased the capital asset in. 

 

Hope this helps,

 

Regards,

JodieR.

Newbie

Replies 3

Hi JodieR, Thanks for the prompt response. Whilst I understand that CG tax is only payable at the time of selling, it also considers a CG event, which in the case I describe of coming back to Australia due to COVID, will potentially change my Residency Status. So I buy a share 10 years ago and it rises 30% in that time. As a non resident I am not liable for CG on that but due to COVID devalues by all of its earlier growth, ie that same 30%. If I come back to Oz to avoid COVID and the share recovers in the next 6 months then I will be liable for CG on any growth from the point at which I am back in Australia. Its a double edge sword also as because the COVID situation hit whilst I was a non-resident, for shares Ive purchased overseas that devalue below the purchase price, when I return the price is essentially reset to the value at the date of reentry but I cannot Claim a capital loss but will have to pay any subsequent capital gain should they recover. It is the issue of changing Tax Residency during COVID that is the Issue. Thoughts? What Id like is either some ruling that says people returning for COVID arent subject to such clause or flexibility on the residency status for people returning because of it. 

ATO Community Support

Replies 2

Hi @Starcraft,

 

I appreciate your concerns. If the capital gain increased significantly and you had reporting requirements in Australia then my advice would be to seek a Private Ruling. You can view further information via the link. 

 

Hope this helps.

 

Regards,

JodieR.   

Newbie

Replies 1

I see that the Government has made a concession relating to people who normally reside overseas but due to COVID Travel restrictions are not able to return home. The concession states that during this time of being temporarily away they will not lose their non-residency status. In this case the person was in Australia but was stuck and not able to leave. In my situation I want to return with my Family from India until this sorts itself out but I will still be working for the same company.

Is there some way of finding out if this COVID ruling extends to Australian Citizens who are returning temporarily on the repatriation flights? 

Community Moderator

Replies 0

Hi @Starcraft

 

Thanks for getting back to us and for your patience.

 

We don't have anything on our website that we can direct you to at the moment, but we suggest that you keep an eye on it. If there is any new information on this, we will update our website accordingly.

 

In the meantime, if you would like us to take a closer look at your situation, you can request an early engagement discussion with us. For more information about our early engagement for advice service, have a look at our website.

 

Good luck with everything.

 

Thanks, Chris