Hidden deep in the 300 plus pages of the 2012 Australian Federal Budget was a small section seeking to raise an additional A$55m of revenue over the next four years. A small enough amount that most wouldn't notice and certainly not mentioned in the Treasurer's Budget Night Speech.
The revenue would come about from the removal of the current 50% Capital Gains Tax concession for non-resident investors in Australia, including Australian expatriates.
What seems small could have a large impact on the confidence of foreign investors that are already weary of the high Australian dollar and high, stable property prices.
If the proposal goes ahead, then any gains made by investors up until 8 May 2012 will still enjoy the 50% discount entitlement to that point and to secure this they are meant to obtain a valuation of their property as at 8 May. Any future increase above that valuation will not be entitled to a gain if the property is sold when the taxpayer is a non-resident.
However it would appear that if you are living in Australia at the time of disposal, then you would still enjoy the full 50% capital gains concession.
This change seems to fly in the face of the "fairness" that Treasurer Swan so desperately is seeking in this Budget, as it now treats resident Australians completely differently to their expatriate colleagues and foreign investors.
One simple solution to this change is to ensure that you do not sell your property, especially not until you are living in Australia. Australia remains free of inheritence tax and death duties, so assets will be better handed down to the next generation rather than sold or transferred.
For the sake of a potential revenue estimate of A$50m, then Treasurer is risking a reduction in the A$20.9bn of real estate activity undertaken by foreign investors in 2010-11, which generates billions of dollars of GST revenue, stimulates and supports the property market and creates essential jobs in the construction industry as well as providing important rental stock for Australia's growing population.
Australian citizens and permanent residents living abroad do not come under these statistics and provide significant additional investment into the property sector.
It is hoped the Government can be shown some sense here to cancel this proposed change before it becomes embedded into tax law.
