My Partner and I are both Australian citizens working and living in NZ , we have bought and lived in our house now for 4 years and we are thinking of selling our house in NZ and moving back to Australia .
So far we understand there is no CGT payment required as we are currently NZ residents , one of us is likely to move back first and start earning a salary in Australia while the house is in the process of getting sold , will we need to pay full CGT in this scenario ? if so how do we avoid/minimize this?
Just to be clear – you were a non resident of Australia for tax purposes when you bought the house and when you come back to Australia you will become an Australian residents for tax purposes again.
In that case when you arrive in Australia is the immediate time you become residents for tax purposes. At that point Australia becomes entitled to tax your worldwide income including capital gains on foreign assets. The good news is that the cost base of your foreign assets is the market value at the date you became a resident of Australian for tax purposes. https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/how-changing-residency-affects-cgt#ato-BecominganAustralianresident By the time you add to this the selling cost it is unlikely you will make a capital gain if you sell within a year. The point is you don’t have to rush and sell before you arrive in Australia. Note the reset to market value when you become a resident also resets your acquisition date. In the unlikely situation that there is a capital gain, you will not be entitled to the 50% CGT discount unless you sell more than 12 months after arriving. Alternatively, if you have not purchased a house in Australia that you want to cover with your main residence exemption you can cover the house in New Zealand with your main residence exemption, under section 118-145 1997 ITAA for up to 6 years if it is earning income or indefinitely if it is not earning income.
In short you have very little to worry about and there is not a sudden tax trap that can be created here. The sudden tax trap is the other way around. If you end up buying a home in Australia, move back to New Zealand and then sell your Australian home you will lose your main residence exemption right back to the time you purchased the Australian house. If you decide to more back to New Zealand and you have made some capital gain on your Australian house make sure you sell it before you leave.