Exceptions – life events happening within six years
If a foreign resident does not qualify for the transitional measures discussed above, they may still be eligible for the MRE where their circumstances come within one of the prescribed exceptions. Broadly speaking, an individual who has been a foreign resident for a continuous period of six years or less at the time of the CGT event may be able to access the MRE if certain life events occur during that period of foreign residency.
An individual who, at the time of the CGT event, has been a foreign resident for a continuous period of more than six years is referred to in the legislation as an ‘excluded foreign resident’. Refer to S.118-110(4). An excluded foreign resident is not eligible for the MRE even if one of the prescribed life events occur. Refer to S.118-110(3)(a).
Conversely, by virtue of S.118-110(3)(b), a foreign resident who satisfies the ‘life events test’ will be eligible for the MRE. Specifically, the ‘life events test’ in S.118-110(5) is satisfied at the time a CGT event happens if:
- the taxpayer has been a foreign resident for a continuous period of six years or less (i.e., the taxpayer is not an excluded foreign resident); and
- one of the following life events apply to the taxpayer:
- the taxpayer, their spouse or child (under 18 years of age) has had a terminal medical condition that existed at any time during that period of foreign residency.
- the taxpayer’s spouse or child (under 18 years of age at death) has died during that period of foreign residency.
- the CGT event happens due to the distribution of assets as a result of the divorce or separation of the taxpayer and their spouse (or ex-spouse).