New Zealanders in Australia fear they are about to be hit with a hefty capital gains tax if they sell their family home under new budget changes.

Photo: 123rf

The federal budget released this month will remove the tax exemption for temporary residents and foreign buyers, as a way of making housing more affordable for Australians.

People who sell a home they owned prior to the release of this month's budget will not have to pay the tax as long as they sell it before July 2019.

Australia's Treasury said it intended to consult the public about the details of the measure.

Tim Gassin, the chair of lobby group Oz Kiwi, said the tax could amount to almost 50 percent of the profit from selling a home.

"It means that yes, many New Zealanders are going to be stung with rates - up to 45 percent - plus having a Medicare levy on top of that whenever they sell their house."

Mr Gassin said most New Zealanders in Australia would not be classified as foreigners for tax purposes, but could be caught out by the definition of temporary tax resident.

"What we're really trying to determine is, did [the Australian government] actually think this through? Was this intentional or have Kiwis just been caught up in what's really a policy that is supposed to be targetting foreign property investors, rather than people who are based here?"

He said what the Australian government had put into the budget would affect Kiwis, but it was unclear whether it planned to implement the policy exactly as stated in the budget, Mr Gassin said.

The Australian government would have a fight on its hands if it did intend to target New Zealanders with this policy change, he said.

Oz Kiwi has asked the High Commission to help, Mr Gassin said.

But the New Zealand government said the capital gains tax changes in Australia were not aimed at New Zealanders.

The Ministry of Foreign Affairs and Trade told RNZ it understood New Zealand expats were not the intended target.

It said expats were not considered foreign investors under Australia's investment rules.

But it added that the tax policy was not fully developed, and it was in talks with Canberra about it and expected to be fully consulted.