Exceptions and transitional measures
The changes to deny foreign residents’ access to the MRE were first announced by the Government in the 2017/18 Federal Budget. A Bill containing the changes was introduced into Parliament in February 2018 and had progressed to the Senate where it stalled until the Bill lapsed when the Federal Election was called on 11 April 2019.
The original Bill was heavily criticized by many during the consultation process as inequitable for its ‘all-in all-out’ approach, retrospective application without any exceptions and limited transitional measures. When the changes were re-introduced into Parliament following the Federal Election, some minor amendments were made, namely, the introduction of an exception to the denial of the MRE for foreign residents as well as an extension to the transitional grandfathering arrangement.
Transitional grandfathering arrangement
Whilst the new changes generally apply to CGT events happening on or after 7:30pm on 9 May 2017, transitional measures are in place to allow foreign residents with an ownership interest in a dwelling before this time to still qualify for the MRE if the CGT event happens to the dwelling on, or before, 30 June 2020. In order for this to apply, the individual must have held an ownership interest in the dwelling immediately before 7:30pm on 9 May 2017 until immediately before the CGT event happens. Refer to S.118-110 of the Income Tax (Transitional Provisions) Act 1997.
The transitional deadline of 30 June 2020 for dwellings acquired pre-9 May 2017 is a 12-month extension to the original transitional period as announced in the 2017/18 Federal Budget (which was previously 30 June 2019).