When it comes to the “perfect storm” for red tape stories spare a thought for Dmitri Psiropoulos, who is trying to sell his ageing mother’s property in Sydney, while he is in Abu Dhabi and she is in Greece before 30 June.
Add to the mix the time delays that COVID-19 measures have imposed on getting anything done quickly and the need to sell the property before 30 June when a main residence exemption on Capital Gain Tax(CGT) applied to foreign tax residents falls away.
A spokesman for Assistant Treasurer Michael Sukkar told Neos Kosmos that the changes to CGT had been common knowledge for 37 months, which has been plenty time to make the necessary adjustments.
“The changes to the eligibility for foreign tax residents to access the Capital Gains Tax main residence exemption were announced in the 2017-18 Budget,” said the spokesman.
“The measure is not retrospective and it will not tax any capital gains realised before the Government announced the changes”
“In fact, by the time these rules come into effect on 30 June 2020, foreign tax residents will have had over 37 months to dispose of their property and still be able to access the tax exemption,” the spokesman said.
However, the bill that brought in the new measures was only passed into law in December last year after it had already been postponed by a year because of elections.
Professor Deutsch of the Tax Institute, who has called for a second 12-month extension of the deadline, told Neos Kosmos that the Treasury was being “disingenuous” in claiming that the expats would have known of the proposed changes for the past 37 months.
“It all started three years ago when they said they would introduce the changes but the actual legislation came into effect last December,” said Prof Deutsch.
He said that once the deadline became binding legislation, expats only had seven months to decide what to do and of that time between the Christmas period and the onset of COVID-19 measures. In reality, he said, they about two to three months to react to the legislation.
Mr Psiropoulos said he only learnt of the changes in legislation to come through an online seminar earlier this year which was held by a financial adviser in the United Arab Emirates where Mr Psiropoulos works as an English teacher.
“Not one person on the seminar knew. Hundreds of expats are in a panic over this. I know I do not have to sell the property in Sydney but my mother is 85 and cannot conduct her affairs from Greece.
He said the CGT would take a hefty chunk out of any sale of the property after 30 June.
“I am not saying the lifting the CGT exemption is a good or a bad thing. I just want more time. Under the current conditions we only had two real months to do anything before the world went into shutdown,” said Mr Psiropoulos.
And from that point on, the time it takes to process official documents has extended to frustrating lengths.
As Mr Psiropoulos is acting on his mother’s behalf he had needed to inform property lawyers and agents in Sydney who have, in turn, required translated, authenticated and notarised documents and signatures from him in Abu Dhabi and from his mother in Greece.
“In Greece, the notaries and translators have not been available. At the Australian embassy in Abu Dhabi where the authentication of documents would take a day it now takes much longer and the embassy says it will only work on ‘exceptional cases’.
“The post office here told me that a document will now take 10 working days to reach its destination not four days.
He said he could not even fly back to Australia to speed things up because he would be faced with a two-week quarantine.
“If we have decided to sell then we expats need to be treated reasonably. Under normal circumstances it would not have been a problem to sell our properties within the six months but these are not normal circumstances. It is almost impossible to do anything in good time. It is very stressful and costly. A nightmare.
Professor Deutsch said the concept of the law (lifting the CGT exemption) was not wrong but the refusal to extend the deadline was a disgrace. He did not think that the revenue raised by lifting the exemption was significant.
“COVID 19 has stalled everything and this has to be acknowledged by the Treasurer. It’s not business as usual,” said Mr Psiropulos.
In a statement to Neos Kosmos the Australian Taxation Office (ATO) said: “The estimated revenue from the measure is $150 million for the 2019-20 income year and $170 million for the 20-21 income year. However, it is important to note this relates to all foreign residents and is not limited to expats.”
♦ For more information on CGT changes visit the ATO web page entitled “Capital gains tax changes for foreign investors”