Hi all
I am seeking opinions on possible investment options.
First of all, my circumstances. I own a fully paid off apartment in Melbourne CBD, valued at approximately $500,000. The apartment is my PPOR. I have no other assets, apart from a bit of cash in the bank.
In the next 6-12 months, I am thinking of accepting a role in Dubai, which would see my income increase substantially. If my calculations are correct, I expect that I will be able to save approximately $100,000 per year, provided I satisfy the ATO's "foreign resident" tests. My plan, at this stage, is to stay in Dubai for 3-4 years, whereupon I will return to Melbourne.
From my perspective, my options are:
Option 1: Keep my apartment, and rent it out. Given that I have fully paid it off, I do not think I will be eligible for any meaningful deductions. Any surplus cash would then be put into term deposit of some sort. I view this option as delivering very conservative returns.
Option 2: Sell my apartment. Use the funds to buy a more expensive property (i.e. $1m) with an interest only loan. Live in the property for 6 months and establish it as my PPOR. Leave for Dubai and rent it out, and send money back to Melbourne periodically to meet mortgage commitments and sink any excess into an offset.
I believe that this option will (a) allow me to maximise deductions; (b) lock in 2013 property prices; (c) give me an investment vehicle for my overseas earnings; and (d) hopefully enable me to pay it off by the time I return, whereupon I will live in the property myself. It is my understanding that I can treat the property as my PPOR (and therefore enjoy CGT-free status) provided I return within 6 years.
Am I missing anything fundamental in my analysis? I appreciate that I need to be careful about structuring my affairs so as to avoid the "residency" tests, but from advice I've received to date, it would appear that owning a residence and renting it out is not, on its own, considered inconsistent with being a foreign resident.
Any thoughts would be appreciated!
I am seeking opinions on possible investment options.
First of all, my circumstances. I own a fully paid off apartment in Melbourne CBD, valued at approximately $500,000. The apartment is my PPOR. I have no other assets, apart from a bit of cash in the bank.
In the next 6-12 months, I am thinking of accepting a role in Dubai, which would see my income increase substantially. If my calculations are correct, I expect that I will be able to save approximately $100,000 per year, provided I satisfy the ATO's "foreign resident" tests. My plan, at this stage, is to stay in Dubai for 3-4 years, whereupon I will return to Melbourne.
From my perspective, my options are:
Option 1: Keep my apartment, and rent it out. Given that I have fully paid it off, I do not think I will be eligible for any meaningful deductions. Any surplus cash would then be put into term deposit of some sort. I view this option as delivering very conservative returns.
Option 2: Sell my apartment. Use the funds to buy a more expensive property (i.e. $1m) with an interest only loan. Live in the property for 6 months and establish it as my PPOR. Leave for Dubai and rent it out, and send money back to Melbourne periodically to meet mortgage commitments and sink any excess into an offset.
I believe that this option will (a) allow me to maximise deductions; (b) lock in 2013 property prices; (c) give me an investment vehicle for my overseas earnings; and (d) hopefully enable me to pay it off by the time I return, whereupon I will live in the property myself. It is my understanding that I can treat the property as my PPOR (and therefore enjoy CGT-free status) provided I return within 6 years.
Am I missing anything fundamental in my analysis? I appreciate that I need to be careful about structuring my affairs so as to avoid the "residency" tests, but from advice I've received to date, it would appear that owning a residence and renting it out is not, on its own, considered inconsistent with being a foreign resident.
Any thoughts would be appreciated!