Kiwis face new tax on house sale profits in latest Australian policy surprise

Foreign Affairs Minister Gerry Brownlee says New Zealanders do not appear to be captured by a proposed rule change in Australia which would require people to pay tax when they sold their family home.

The Australian Budget earlier this month removed an exemption from capital gains tax on a main residence for foreign and temporary tax residents.

It raised concerns from Kiwi expats that they would have to pay tax of up to 50 per cent of any house sale profits.

Brownlee said today that the policy had not yet been written into legislation and it was unclear what it's exact impact would be.

"What it looks like is the Australian Budget wants to capture some of the foreign purchases of land, similar to the way we do in New Zealand.

"But that doesn't mean that New Zealanders are caught, at this point. We are still in discussions with Australia about that."

A Ministry for Foreign Affairs and Trade spokeswoman said it was understood that New Zealanders were not the intended target of the policy.

"For example, New Zealanders living in Australia are not considered foreign investors for the purposes of Australia's foreign residential property investment regime."

Brownlee received an assurance just three weeks ago from his Australian counterpart Julie Bishop that New Zealand would be told of any policy shifts which affected New Zealanders living in the country.

That assurance came after New Zealand expressed frustration with the lack of notice for major immigration and education changes announced in the last two months.

New Zealand did not appear to have been given advance warning about the capital gains measure.

But Brownlee did not see this as another blunder by Australia. He said the two countries were now in discussion and that New Zealand would have input into any law changes.

Under the Budget proposal, New Zealanders who already own a home would not have to pay the tax if they sold the property before 2019.

OzKiwi chairman Timothy Gassin said expats could have to pay a tax of up to 50 per cent on any profits under the proposed changes.

He said many Kiwis living in Australia were classed as "temporary tax residents" and would therefore be captured by the Budget change.

Prime Minister Bill English said this morning he had not seen any details about the proposal.

"Anyone who lives in Australia, of course is subject to the Australian Government's Budget decisions. And if they're acting on foreign buyers or non-resident taxpayers ... then it's possible Kiwis are caught up in that.

"But I haven't seen any particular advice about the proposal."

English said Kiwis were being sent a clear message that "there isn't the same safety net in Australia that there used to be".