Outcome
Vale Legal successfully resolved a complex Australian Taxation Office (ATO) audit, resulting in the client receiving a refund of $482,500, being the full foreign resident capital gains withholding amount that had been held by the ATO. The audit was finalised swiftly, with no penalties imposed, after the ATO accepted that the client was an Australian tax resident and entitled to the main residence capital gains tax exemption. What could have become a prolonged dispute was resolved efficiently and decisively.
Customer
The client was an Australian individual who had spent extended periods overseas for travel and short-term work opportunities. During this time, she owned and later sold a Sydney property that had always been her primary residence. She sought legal assistance after her tax affairs were selected for audit by the ATO following the sale, raising concerns about her residency status and eligibility for key tax concessions.
Problem
The ATO audit focused on several interrelated issues arising from the sale of the property. Because the client’s income tax returns for multiple years had been lodged on a non-resident basis, the ATO initially treated her as a foreign resident at the time of sale. This triggered a substantial foreign resident capital gains withholding amount and jeopardised her access to the main residence exemption.
The matter was particularly complex because residency for tax purposes is not determined by a single factor or a simple day count. It required a detailed analysis of the client’s movements, intentions, personal ties, assets, and long-term connection to Australia across several income years. Without careful handling, the client faced a large and unnecessary tax cost on a property that had always been her home.
Solution
Vale Legal took a strategic, evidence-based approach grounded in specialist taxation expertise. We conducted a comprehensive review of the client’s factual circumstances, including her travel history, accommodation arrangements overseas, family and financial ties to Australia, and ongoing connection to her Australian home.
Relying on the ATO’s binding guidance on individual tax residency, we prepared a detailed submission demonstrating that the client had remained an Australian tax resident throughout the relevant period. We clearly explained why her time overseas was temporary and exploratory rather than a permanent relocation, and why Australia had remained her real home.
Vale Legal also addressed technical capital gains tax issues, confirming the correct contract date, treatment of associated property interests, and the proper income year in which the transaction should be reported. Clear, structured legal submissions were provided directly to the ATO, supported by contemporaneous evidence and legislative authority.
As a result, the ATO accepted the client’s position, amended the relevant assessments, applied the main residence exemption, and refunded the full withholding amount.
Testimonial
“Greg was extremely knowledgeable, efficient, and took great care with my case. Communication was prompt and thorough, and the outcome was completely successful. I wouldn’t hesitate to recommend Vale Legal and will engage them again for any future legal matters.”
