Understanding Life Events Affecting Tax Residency Status
When living abroad, certain life events can impact your tax obligations, especially when related to the Main Residence Exemption (MRE) under Australian tax law. Here’s a simple breakdown of how certain critical life events affect your eligibility for tax exceptions.
Terminal Medical Condition According to Regulation 303-10.01 of the Income Tax Assessment Regulations 1997, a 'terminal medical condition' exists when two medical practitioners certify that an individual has an illness or injury likely to result in death within 24 months from the date of certification. If you, your spouse, or your dependent child under 18 years old receives this diagnosis while you’re a foreign resident, this condition might help you qualify for the MRE, provided you’ve been a foreign resident for six years or less.
Death If your spouse or child under 18 passes away during your period as a foreign resident, this tragic event also fulfills the requirements for the MRE, as long as the foreign residency period does not exceed six years.
Divorce or Separation Divorce or legal separation involving the distribution of assets between you and your spouse can qualify you for the MRE. This applies if the disposal of your main residence occurs due to a family law matter under S.126-5(1) or an equivalent rule under a foreign law. The main condition is that the property division must be legally enforceable and arise from the family law proceedings.
Each of these life events can significantly impact your tax situation as an Australian expatriate. If you’re dealing with any of these situations and need guidance on how they may affect your tax returns or MRE eligibility, feel free to contact Tax Ideas Accountants & Advisers at +61 2 83181545, or schedule an appointment directly through our online calendar.
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