Changes to CGT discount and its potential impact
Client alertExplores proposed CGT discount and negative gearing reforms and what they could mean for investors.
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The rules which will apply from the first income year after the date of Royal Assent replace the existing Australian residency rules which were first enacted 85 years ago and are becoming unfit for purpose in a global working environment.
This has been brought further into the spotlight in the past 18 months with COVID 19 leading to stranded expatriate employees caught in Australia or their home jurisdictions uncertain of their tax residency positions due to complex residency rules and contradictory case law providing inconsistent guidance.
The principal focus of the new rules is on a two-step simplified approach consisting of;
Whilst no new details were announced in today’s budget, the 2019 Board of Taxation report to Government Reforming individual tax residency rules — a model for modernisation, which has laid the foundations for today’s announcement included the following ‘factor tests’:
Importantly the framing principle of the above application of the Factor Tests is the adhesiveness principle. That is, residency is harder to cease than it is to commence.
The proposed changes to the residency rules were necessary and will provide greater certainty on an individual’s residency status and bring Australia more in line with other OECD nations’ application of tax residency tests. However, it is still important to recognise;
Explores proposed CGT discount and negative gearing reforms and what they could mean for investors.
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