Background

Anand and his wife Tara migrated from India to Australia in 2022 and are now Australian tax residents. Before migrating, Anand owned a residential property in India, purchased in 2016, which he used as his main residence until their departure in 2022. Additionally, Anand invested approximately AUD $50,000 in gold bullion prior to migration.

Now settled in Australia, the couple wishes to purchase their first home here. To fund the purchase, they are planning to sell both the Indian residential property and the gold bullion and transfer the proceeds to Australia.

They approached Investax to understand their Capital Gains Tax (CGT) implications and whether any tax planning opportunities were available.

Issue 1: CGT on Sale of Overseas Residential Property

As Australian tax residents, Anand and Tara are subject to tax on their worldwide income, which includes capital gains from the disposal of foreign assets such as real estate.

Key Points:

1. Cost Base Reset on Residency: Under section 855-45 of the Income Tax Assessment Act 1997, when Anand became an Australian tax resident in 2022, the cost base of his Indian property was reset to its market value as at the date of residency. This is because the property is a non-taxable Australian property (non-TAP).

2. Main Residence vs. Investment Property: The main residence exemption can apply to your former home, even if it’s overseas, provided certain conditions are met. Notably, if you rented out your former home, you might still be eligible for a partial exemption under the “6-year rule,” which allows you to treat the property as your main residence for up to six years after moving out, provided you didn’t treat any other property as your main residence during that period.

Had the property been classified as an investment at the time of migration, the same cost base reset rule would apply. That means the capital gain would be assessed on the difference between the sale proceeds and the market value of the property at the time Anand became an Australian resident.

CGT Discount Eligibility if it’s an Investment Property: If the property is held for more than 12 months after the residency date, Anand may be eligible for the 50% Capital Gains Tax (CGT) discount on the Australian taxable portion of the gain, assuming all other conditions are satisfied.

Note: There may be additional implications if the property generated rental income after residency and that income was not declared to the ATO.

Issue 2: CGT on Sale of Gold Bullion

Key Points:

1. CGT Applies: The sale of gold bullion is treated as a CGT event under Australian tax law. As Australian residents, Anand and Tara must declare any capital gains from such sales.
2. Cost Base Reset: Since the gold was acquired prior to becoming Australian residents, the cost base is reset to the market value on the date Anand became a tax resident in 2022. This is an automatic rule for non-TAP assets, such as gold.
3. 50% CGT Discount: If the gold bullion is held for more than 12 months from the date of residency, the 50% CGT discount should apply to reduce the taxable gain.

Conclusion: Don’t Let a Lack of Knowledge Lead to an Unexpected Tax Bill

When it comes to selling overseas property or investments after migrating to Australia, what you don’t know can cost you. Many taxpayers are caught off guard by capital gains tax obligations simply because they were unaware of the rules—especially when it comes to concepts like cost base resets, main residence exemptions, and worldwide income reporting.

Without the right guidance, what feels like a smart financial move—like selling your former home or liquidating gold—can result in unexpected tax burdens and missed opportunities to reduce your liability.

That’s why it’s essential to speak to a qualified tax specialist who understands both domestic and international tax laws. If you don’t already have a tax adviser who specialises in these areas, we encourage you to reach out to a firm like Investax. Our team works closely with migrants and investors to help them make informed decisions and stay compliant—while also maximising their tax position.

🔍 The takeaway?

There are real tax-saving opportunities but also risks if income or gains are misreported. Proper advice and record-keeping are essential.

If you’ve migrated to Australia and are planning to sell overseas assets—or just want to make sure you’re staying compliant—speak with the team at Investax. We’ll help you navigate the complexities and structure your affairs smartly.

Reference

ATO – Treating Former Home as Main Residence 

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