Advisers servicing former or current non-residents should be mindful of the proposed changes to capital gains tax (CGT), according to Hall & Wilcox Lawyers.
The Assistant Treasurer and Minister for Financial Services and Superannuation Bill Shorten released exposure draft legislation and explanatory material last month to remove the CGT discount for temporary and non-residents.
Minister Shorten said the 50 per cent CGT is not necessary to attract investment from non-residents into Australian taxable property, Hall & Wilcox warn the draft legislation would apply to new, former and current Australian residents.
Taxable Australian property includes real property situated in Australia, certain mining assets and indirect interests in these assets such as holdings of at least 10 per cent in a land rich entity.
The rules in the exposure draft will apply to any taxpayer who is or was a non-resident of Australia while they or a trust held the CGT asset.
"We believe a more straightforward alternative would be to allow the full 50 per cent CGT discount where the CGT asset was acquired on or before 8 May, 2012," the law firm stated.
"We also believe the Government should reconsider whether it is within the original policy intent to extend these changes to deemed taxable Australian property assets; a key consideration is the compliance burden and latent nature of the rules which may not be well understood."
Advisers should consider the proposed rules when advising Australian who are considering working overseas, foreign executives who are working in and are a resident of Australia, clients who were non-resident at 8 May, 2012, among other scenarios, the law firm said.
