Australian expatriates are lobbying Prime Minister Malcolm Turnbull to overturn proposed tax changes that will force them to pay hundreds of thousands of dollars in capital gains tax if they sell their family home while working overseas.
A powerful lobby of Australian business and education interests in Asia this week warned the move was already making it harder to recruit staff and would damage Australia's people-to-people engagement with Asia at a time when it was trying to build a closer relationship with the region.
The demise of the home ownership perk as part of wider measures to improve housing affordability announced in last year's budget means foreigners would not be entitled to a capital gains tax exemption on their main residence if they sold the property while living overseas. The changes, currently before the Senate, impact more than 100,000 Australians living and working offshore.
"I understand the government needs to look at ways to kerb foreign investment but to hurt Australians living offshore and penalising them for living offshore defies logic," Jacinta Reddan, the chief executive of the Australian Chamber of Commerce in Hong Kong, told the AFR Weekend.
"We are living in an increasing globalised world and the Asia diaspora is an enormous benefit to the Australian economy. It is penalising Australians for living and working offshore, whether it is Hong Kong, London or New York."
The chamber, which represents one of the largest concentrations of Australian businesses overseas, is working with groups representing Australians in other parts of the world to pressure Treasurer Scott Morrison to exempt expatriates from the changes. Australians living overseas have until June 30, 2019, to sell their primary residence in Australia without being stung with CGT if they owned the property before last year's federal budget.
Under the changes, if an expatriate made $500,000 on the sale of a property owned over decades before returning to Australia, they could pay more than $200,000 in tax.
While people who return home to live in their property can regain CGT-free status after a period, Ms Reddan said expatriates did not always have a choice about when to sell if there was a divorce or illness involved or their parents passed away.
Ms Reddan said Australian companies in Hong Kong had already expressed concern about their ability to transfer staff to Asia under the proposed amendments.
The Australian International School Hong Kong principal Mark Hemphill said the changes meant the school would have trouble attracting Australian teachers and feared it would lose enrolments, and even potentially close, if Australians stopped moving to the region to work.
"Many of our families may be affected by your decision and therefore we may lose enrolments and the viability of our school's existence will be jeopardised," Mr Hemphill said in a letter to Mr Turnbull.
Steve Douglas, executive chairman of Singapore-based SMATS Group, which provides tax advice to expatriates and foreign investors, said there were fears the move would lead to more extreme measures such as watering down the tax-free status for all Australians. He said the legislation would also impact Australians living overseas who inherited a property if their parents passed away.
"It is so unjust, that even if you had lived in your home for 20 years, if you happen to be living overseas for one month and sell the property while abroad, all of the gains from the full 20 years become taxable, where normally it would be tax free as your principal residence," Mr Douglas said.
In a letter to Mr Turnbull, the chamber argued the move flies in the face of the Coalition's Foreign Policy White Paper which talks about the importance of a "globalised world of individuals" as it would force many Australians to stay at home instead of working in the region.
In its submission to the Senate on the issue, CPA Australia said its 163,000 members living overseas believed it was "unreasonable to effectively penalise Australians" for moving overseas to work or for personal reasons.
The Coalition argues its measures are a "scalpel" compared to Labor's "sledgehammer" of removing negative gearing and reducing the capital gains tax discount for all Australians.
This article was published and provided by the Australian Financial Review.