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Our family are Canadian non-residents living in Australia. We have been here 5 years. We are thinking about coming back to Canada and re-establishing ourselves are permanent resdidents.
1. We sold our house prior to leaving and on our second property we were advised to do a deemed disposition of our seasonal non-winterised recreational property when we left. We wondered what is involved with unwinding a deemed disposition.
2. We were not taxed on our funds brought to Australia and used to purchase our home here. Will Canada want to tax us on the income from sale of our primary Australian residence when bringing those funds to Canada to purchase a home there?
Thanks for your time. We love your youtube channels and the work you share with others!
Hi Jay Dee,
Thank you for reaching out—and I really appreciate your kind words about my YouTube channel. I’m glad you’ve found the content helpful!
It’s great to hear your family is considering a return to Canada after your time in Australia. I’ll walk you through the main points you raised:
1. Deemed Disposition – Recreational Property
When you became non-residents of Canada, you likely filed a deemed disposition of certain Canadian properties for tax purposes. This means Canada treated you as if you had sold the property at fair market value on the date of departure, even though you retained ownership.
If you're returning to Canada and still own the property:
- There’s no formal “unwinding” of the deemed disposition.
- However, your cost base for Canadian tax purposes resets to the deemed disposition value when you left.
- When you eventually sell the property, you’ll only pay Canadian capital gains tax on any increase in value since your departure date (not the original purchase price).
- It’s important to document the FMV at departure, if not already done.
2. Funds from Sale of Australian Home
Canada does not tax the money you bring into the country, even if it comes from the sale of your Australian home. However, there are two things to be aware of:
- If you sell the home before becoming a resident again, there's no Canadian tax on the sale (Canada has no taxing rights over you at that time).
- If you become Canadian residents before selling, the property becomes "taxable worldwide income" again—including capital gains from foreign real estate.
In that case, you can establish a new cost base as of your re-entry date (fair market value), which helps reduce or eliminate any gain taxable in Canada.