Expats with Aussie IPs

[kristaje]

It's not a big deal to get a val. I'd be doing it.

Is this Valex charges reasonable? Or could anyone please recommend a good reasonably priced valuers? We'd need to do few places, so expect the total cost to sting a bit! <sigh!>

I think it applys to Aussies who are non-residents for tax purposes.
To be considered an Oz resident for tax purposes you need to reside in Oz for at least 183 days of the financial year. The main benefit is claiming the tax free threshold and receiving the lower tax rate of 19% for the first $37,000 of income earned. From an expat point of view, the non-resident tax rates have changed and there is a new combined tax rate of 32.5% applying on the first $80,000 of taxable income with an increase to 33% from July 1, 2015.

I'm still waiting to hear from our accountant, but expect this change to apply to us too. We're Oz PRs (but not Citizens). Lived 10y+ in Oz until hubby's work took us to HK. And expect to be back to Oz at some time.

Thanks. Didn't realized that the non-resident tax rate had also changed. I think in our case it's still probably better to be non-resident though. The top tax rate here is 17%!

 

[HomeBuyAU]

I have a couple of questions

I travel and live overseas a lot these days but I wonder what classifies me as an expat with the tax department? Do I have to live overseas for a certain amount non stop or what? What if I have a business in Australia that makes money online from US customers but I live in an Asian country for 8 months per year? I recently left on a trip 3 months ago but came back a few days ago after the tenant broke lease and the unit needs renovating... i cant wait to finish my work and get the heck out of here, so cold .. my island beach paradise is waiting for me as is my beautiful young fiancee

and when I finish the renovations in about a month will getting it valued then be the best idea?

 

[shuggy]

Is this Valex charges reasonable? Or could anyone please recommend a good reasonably priced valuers? We'd need to do few places, so expect the total cost to sting a bit! <sigh!>

I've been in touch with HTW and trying to get a deal done if they value a few places at once. I think they normally charge about $550 per property.

I'm still waiting to hear from our accountant, but expect this change to apply to us too. We're Oz PRs (but not Citizens). Lived 10y+ in Oz until hubby's work took us to HK. And expect to be back to Oz at some time.

Thanks. Didn't realized that the non-resident tax rate had also changed. I think in our case it's still probably better to be non-resident though. The top tax rate here is 17%!

Yes HK is a tax haven but i also hate losing my non-res status, tax free threshold and paying 32.5% on the first 80k of Oz income (not that i earn that much!).

 

[shuggy]

I travel and live overseas a lot these days but I wonder what classifies me as an expat with the tax department? Do I have to live overseas for a certain amount non stop or what? What if I have a business in Australia that makes money online from US customers but I live in an Asian country for 8 months per year? I recently left on a trip 3 months ago but came back a few days ago after the tenant broke lease and the unit needs renovating... i cant wait to finish my work and get the heck out of here, so cold .. my island beach paradise is waiting for me as is my beautiful young fiancee

and when I finish the renovations in about a month will getting it valued then be the best idea?

My accountant tells me you need to reside in Oz for at least 183 days of the financial year if you want to be considered a resident for tax purposes. If you live in an Asian country (Thailand?) 8mths of the year then it's likely you're a non-res but check with your accountant.

I would get your place valued after the reno. With these new rules it's best to have a high val so that the difference between the val and selling price is minimised and you pay less CGT.

 

[HomeBuyAU]

My accountant tells me you need to reside in Oz for at least 183 days of the financial year if you want to be considered a resident for tax purposes. If you live in an Asian country (Thailand?) 8mths of the year then it's likely you're a non-res but check with your accountant.

I would get your place valued after the reno. With these new rules it's best to have a high val so that the difference between the val and selling price is minimised and you pay less CGT.

thanks for this advice, very helpful..

 

[ozmale42]

So properties purchased before 2012 gets the discount


Lost me there, can you explain that further with a link preferably?

OK if property purchased pre Sept 1985 CGT won't apply regardless of residency status as teh asset is a "pre CGT asset".

If purchased after Sept 1985 but before Sept 1999 and sold after this new proposed legislation in relation to expats comes into effect (8 May 2012) the taxpayer can elect to

- use cost base indexation to Sept 99 with indexation frozen at 9/99, OR

- use the capital gains discount method based on the valuation at 8 May 2012


No further discount allowed when calculating the profit made for the period from 8 May 2012to the date of sale. (i.e sale price less 8/5/2012 valuation)

Property must be held 12 months otherwise no discount applies in any event

http://www.exfin.com/australian-budget-2012

 

[kristaje]

I have a couple of questions

I travel and live overseas a lot these days but I wonder what classifies me as an expat with the tax department? Do I have to live overseas for a certain amount non stop or what? What if I have a business in Australia that makes money online from US customers but I live in an Asian country for 8 months per year?

ATO website has a really good tests & examples to find out if you're indeed should be considered a resident for tax purposes:
http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/64131.htm&page=3&H3

I've been in touch with HTW and trying to get a deal done if they value a few places at once. I think they normally charge about $550 per property.

OUCH!
Is that the going rate? I was expecting something around $250-ish, similar to ones paid to bank when taking the loan. We'd need to do almost 30, so it'd really sting!

Anyone could recommend a cheaper good valuer please?

 

[shuggy]

OUCH!
Is that the going rate? I was expecting something around $250-ish, similar to ones paid to bank when taking the loan. We'd need to do almost 30, so it'd really sting!

Anyone could recommend a cheaper good valuer please?

30 properties, you must be loaded
Yea $550 is a bit rich, maybe we could pool together and negotiate a good rate.

 

[kristaje]

Nah. We're small fries compared to some of the SS-ers. And still need to wait for time to do its magic....

Pooling is a good idea. I'll wait for confirmation from our accountant first though, if we really need to do this. Cheers.

 

[babushka]

I have spotted a few articles on this CGT no discounts for non-residents owning IPs in Australia. I have just raised this very question with our accountant, and will wait for a reply. And, I am going to a talk by an Australian tax company (in London) tonight about this same topic. So, I hope to get a few questions answered.

Made me wonder if overseas investors would be bothered to invest in Australian properties any more. In London, some companies have pushed this (investing in properties overseas) hard. But, now I am not so sure if people will invest in Australia - following the announcement in the latest federal budget. Instead, they will just buy properties in the continent - closer to the UK, and no CGT issue.

Q - Does anyone think / know that the valuation costs will be deductible now, or they can be deducted when properties are sold?

Q - We have properties in our name, as well as in the family trust name. So, those properties in our name will need to be valued. But, I guess those properties owned by the trust will also need to be valued because when they are sold, they will be distributed to beneficiaries (who are non-residents, and will need to pay 100% CGT). Do you agree?

Thanks for your views.

 

[Mindmaster]

I'm not sure I understand this properly. Basically after the cut off date, you loss 50% of your capital gains discounts.

Say for example this is my situation.

I bought an IP at the date of cut off on the 8th May 2012 for 100k. I sell it for 150k 5 years later and my total discounts during this time is 30k (purchase costs, REA's commission etc).

I lose 50% of my CGT discounts so that leaves me with 15k of discounts.

Annual gains is 10k. Annual discounts is 5k. Net Annual taxable income from the sale of that IP is 5k which is then added to other annual taxable incomes (rent, salary, business profit, share dividends...) to give a total annual taxable income less annual deductions.

Is this correct?

 

[Aaron_C]

No that is wrong Mindmaster. Capital Gain is worked out as capital proceeds minus the cost base.

Using your example:

Capital proceeds (i.e. sale value) is $250,000. The total cost base is $100,000 + $30,000 = $130,000. So the total capital gain is $120,000.

Under the old rules the taxable part of that capital gain was halved so you only had to pay tax on $60,000 added to your taxable income.

However, under the new changes you are no longer eligible for the discount so the full $120,000 gain is added to your taxable income.

This gets a bit more complicated if you bought the property long before the changes 2 weeks ago. In that case any capital gain PRIOR to the changes in the budget will be halved. However, any additional capital gain made after the changes will have their capital gains tax payable in full, without any discount whatsoever.

 

[DEC]

I think it applys to Aussies who are non-residents for tax purposes.
To be considered an Oz resident for tax purposes you need to reside in Oz for at least 183 days of the financial year. The main benefit is claiming the tax free threshold and receiving the lower tax rate of 19% for the first $37,000 of income earned. From an expat point of view, the non-resident tax rates have changed and there is a new combined tax rate of 32.5% applying on the first $80,000 of taxable income with an increase to 33% from July 1, 2015.


Assuming they've been held for more than 12mths however 100% CGT will apply to any assets purchased after May 8th 2012.

Any asset acquired before September 20th 1985 are known as pre-CGT assets.

All sounding like a great reason for selling everything after we finish working and before we move OS and investing in a country with more favourable tax or even none at all.

 

[Ed Barton]

Hi,

Sorry to hijack the thread, but what sort of an impact it would have on the market here?

More prop on the market for sale?

IMO...
1. Overseas investors will look around to see growth prospects and tax in other countries. Have no idea how that will influence the market here.
2. new Ex pats renting out their PPOR while OS for a short while on work will probably continue to do so, so they have their 'dream' home to return to. Ex pats who expect to be away longer may want to sell, increasing supply.
3. Ex pats already OS will continue to keep the rented 'dream' residence to return to, but may decide to sell IPs.

On balance i think there will be little change in supply and demand and price pressure.

 

[Rob G.]

IMO...
1. Overseas investors will look around to see growth prospects and tax in other countries. Have no idea how that will influence the market here.
2. new Ex pats renting out their PPOR while OS for a short while on work will probably continue to do so, so they have their 'dream' home to return to. Ex pats who expect to be away longer may want to sell, increasing supply.
3. Ex pats already OS will continue to keep the rented 'dream' residence to return to, but may decide to sell IPs.

On balance i think there will be little change in supply and demand and price pressure.

Why the focus on ex pats ?

Non-residents are exempted from CGT on nearly all investments in Australia.

One exception is real estate, partly because that investment does not contribute to this country's production & wealth.

When Aussie domiciles choose to relocate to change residence and avoid paying Australian tax on their foreign source income then they will fall under the non-resident rules.

Nearly forty years on, nations are just getting used to the fact that capital gains are just as much income as any other form and concessions are phasing out.

It is starting with non-residents, but there are plenty at the Treasury that want it to go further.

Probably to pay for their generous government pensions.

Cheers,

Rob

 

[babushka]

Last night I went to a budget briefing by the Australasian Taxation Services (smats.net) in London. Steve Douglas - he founded the smats group - gave a fairly entertaining, but seriously informative, summary of the salient points of the 2012 federal budget.

Of course, he discussed the tiny print about 100% CGT for non-residents in the budget (non residents are either Australians living overseas, or overseas investors, who own properties in Australia). Below were what Steve Douglas said:

1. Do not sell your properties - particularly if you plan to retire or come back to Australia. The 100% CGT applies when you sell a property while you still live overseas (a non-resident). If you return to Australia, then you will become a resident for tax purposes again.

2. Do not rush out to get a valuation for your property. We have yet seen the legislation with the finer details before Parliament. Steve Douglas is doing a petition to get Parliament to re-consider this. He would like us to support him by signing the petition. He will release the petition soon. I have not seen it, but personally I will support it. I will post the link to the petition for those forumites who would like to support it - when available.

3. If Parliament goes ahead with the legislation (hopefully they won't), then Steve Douglas will organise a discount for group valuations. He did not mention which valuers these may be. In the meanwhile, he said we should not waste our money on doing the valuations - just yet!

4. Yes, the valuation, when done, can be restrospective to 8th May 2012.

I personally think this is like the vendors tax in NSW!

 

[babushka]

links to petition letter to Wayne Swan

Here is the link to Steve Douglas' petition letter to Treasurer Wayne Swan re 100% CGT for non-residents owning properties in Australia. I am going to support it - purely from a personal interest in the issue. I hope some forumites (non-residents for tax purposes) will support this.

http://aussieproperty.com/Competiti...axpayers/132b8d20-8f85-47e2-9a4a-571b84f20ed6

And, here is the link explaining the proposed change to CGT for non-residents.

http://aussieproperty.com/Uploads/Emails/Docs/Ask_Steve_CGT Change UK.pdf

 

[kristaje]

Many thanks Babushka, for the informative post and petition link. Much appreciated

 

[HomeBuyAU]

yeah thanks Babushka for the info and link.

I'm wondering If I should destroy my aussie passport and just use my NZ passport and citizenship, start living paying tax there instead? I would then not have to pay CGT too on my IP?

 

[Mindmaster]

Thanks for clearing that up AAron. I was confused by the discount in"CGT discount". Got a lot to learn about accounting for property investment.

I like how if you are an Aussie resident at the time of sale, get the full discount. So you arrange the sale, get the contract signed, rush back before settlement, change your addresses and make yourself a proper kosher resident, grab your gains, pay your taxes then switch your residence back to overseas again I can live with that

No that is wrong Mindmaster. Capital Gain is worked out as capital proceeds minus the cost base.

Using your example:

Capital proceeds (i.e. sale value) is $250,000. The total cost base is $100,000 + $30,000 = $130,000. So the total capital gain is $120,000.

Under the old rules the taxable part of that capital gain was halved so you only had to pay tax on $60,000 added to your taxable income.

However, under the new changes you are no longer eligible for the discount so the full $120,000 gain is added to your taxable income.

This gets a bit more complicated if you bought the property long before the changes 2 weeks ago. In that case any capital gain PRIOR to the changes in the budget will be halved. However, any additional capital gain made after the changes will have their capital gains tax payable in full, without any discount whatsoever.