How is Melbourne these days ??

S

SamSiam

I live overseas, have so for the last 8 years.

I have recent thoughts to sell a commercial property I have in Melbourne, but also contemplating other options.

One negative is the CGT I would be hit up for so my accountant tells me and that is a huge disincentive to sell believe me.

The property is classed as a blue chip location in the inner city suburbs and worth $3 million on a good day and 2.5 on a not so good one.

The return is good for as I bought it some time ago. If an investor buys it, then the return is not so great at the market price.

However, a shop I used to have lunch at sold a few months ago for near $1 million above the reserve price and its rental return is less than mine, but with similar terms as in years left to run.

If I did sell it, also wondering what to do with it as not interested to return to Australia anytime soon to manage anything there. But I also have children and some property in Australia for them in the future is a nice thought.

Any thoughts welcome.

Thanks
 
Hi SamSiam,

Depends what it is. If it is retail........you may do better selling now. Some silly prices were being paid last year and yields circa 2-3 % for "blue chip" strip locales. You may find that those expectations wane soon and as cap rates rise, the value of your asset drops. Propsective buyers may be expecting to buying on better yields.

If it is office. I would keep it and hold on....giddy up in Melbourne and Perth. From the sounds of your post (being blue chip) I presume it isn't industrial. Not sure what that market is doing in Melbourne.

Bottom line is, what is your intent for the funds? How strong is the current lease and tenant? Run a "what if scenario" should the tenaant run away and you are left with an empty box.....how long to re-lease and for what rent? Is this acceptable to you?

Whilst you may be enjoying a decent yield now based upon your entry (purchase) price......could those funds do better elsewhere after allowing for CGT?

If it is a long lease and good bond and decent enough tenant and it's all cruisy and easy on auto-pilot, then leave it alone. If not....ask yourself more questions.

Some more info and possibly reflection by you as to what you want moving forward may help clarify your intent.
 
I should keep it, really but I want to do other things and the funds would be very handy if I decide to take that route.

The tenant is excellent, it has not been vacant for decades basically and the lease left to run is 10 years....it runs on auto pilot almost.

But if I have missed the Melbourne hot spot, then I do not really want to turn around and sell it in a declining market.

That's the problem with living overseas and not paying attention and letting things just roll along fat dumb and happy, you miss the boat so to speak.

Its tricky when you relate to what the money could do for you elsewhere, because that is the unknown really. But considering the capital gain I would make off of it would be very nice, I then have to find a replacement investment of equivalent income and that is not so easy when you are not Johnny on the spot.

Funnily enough if the tenant runs away, which is highly unlikely, the value increases as it has development potential immediately.
 
Is it under a company? If it's under a company, you might be able to pay less tax if you sell the company. But I'm no accountant so you might want to check with yours.

It's a good problem to have. I'll take this type of problem anytime. One day, I hope to have a similar problem. :)
 
Yes it is a nice problem to have in reality.

It is in a company but apparently selling the company then leads into fringe benefits tax and such and basically the taxes are payable somewhere somehow...

Not trying to avoid, just reduce if possible.

I know I get 2 years to purchase another income producer to the value of the sale of the asset, but why sell then if that is the case just to try to buy the same....or am I missing something.

Also I was told recently that if I was classed as a non resident o/s, then I would have 6 years to sell it from the time I became a NR and pay no CGT.....I am not a NR yet. Problem with that is that you have to have the property valued when you become a NR and it is the difference I believe that is non taxable or CGT free from that period until you sell it as long as it is under 6 years..
 
SamSiam said:
Also I was told recently that if I was classed as a non resident o/s, then I would have 6 years to sell it from the time I became a NR and pay no CGT.....I am not a NR yet. Problem with that is that you have to have the property valued when you become a NR and it is the difference I believe that is non taxable or CGT free from that period until you sell it as long as it is under 6 years..
Click to expand...

If you've lived o'seas for 8 years then you're definitely classed as a non-res.. check with your accountant but the only way to reduce CGT is if you come back to Oz and live there for at least 6mths before selling.

You have to live in Oz for 6mths of every year not to be classed as a non-resident. I'm also selling a Melb property soon but the extra tax of about $8,000 isn't worth me coming back to live in Oz for 6mths so i'd rather pay it.

I suspect you live in Thailand as well so you'll know the cost of living is much cheaper than Oz. It would cost me more than $8k to live in Oz for 6mths.

If you're on facebook have a read of this.. you don't need to be his friend, it's all public but you have to log in first:
https://www.facebook.com/timshark/posts/1927276343112
 
No, to be a non resident you have to also be classed as one officially.

Also companies need 1 director to be a resident, I am a sole director. I could get around that if I wanted to, but have not bothered as it is a tad troublesome.

So, I am still classed as resident.

Secondly, it is a fact that if you move overseas and you class yourself as NR from the word go, you can have your property formerly valued at the time you leave and you then have 6 years to sell the property and pay NO cgt, but you have to remain a NR that whole time.

So, the difference in price between the valuation and the sale price say 6 years on, you pay no CGT on that at all.


As for living in Oz for 6 months before selling....are you talking about the 'primary residence' thingy ? If so, i thought it was 12 months you had to live in it ? I did this about 10 years ago and lived in a property for 12 months and then sold it for a 400k premium.....no tax....that was sweet.
I have a friend here that is the manager of a large international company, they have all these corporate and tax advice professionals for their execs as so many are expats working overseas....he is doing this at the moment and considering to sell his property or not.

Yes, I live in Thailand and it is much cheaper than Oz...doubt I could live back there now...but never say never.
 
.....................
SamSiam said:
No, to be a non resident you have to also be classed as one officially.

Interesting.. i'm not sure how one gets classified as a non-res "officially" but my accountant advised me that i was one after being away for 3yrs. All my share dividend notices also have "Non Resident" recorded next to my TFN/ABN status so not sure how that came about.

Also companies need 1 director to be a resident, I am a sole director. I could get around that if I wanted to, but have not bothered as it is a tad troublesome.

I was also sole director of my company until i deregistered so didn't affect me even though it was after 2yrs being absent from Oz.

So, I am still classed as resident.

You're lucky you've been able to fly under the radar for so long and still classed as a resident. My accountant tells me to become an Oz resident for tax purposes you need to reside in Oz for at least 183 days of the financial year.

a) If you become an Australian Resident for tax purposes, the only benefit compared to being a non-resident is claiming the tax-free threshold and receiving a lower tax rate of 15% for the first $37,000 of income earned.

b) If you are a non-resident when you sell xxx, you will be taxed at a higher rate of 29% for income up to $37,000 for the 2011 financial year and normal rates after the $37,000.

Secondly, it is a fact that if you move overseas and you class yourself as NR from the word go, you can have your property formerly valued at the time you leave and you then have 6 years to sell the property and pay NO cgt, but you have to remain a NR that whole time.

So, the difference in price between the valuation and the sale price say 6 years on, you pay no CGT on that at all.

I think you're talking about the 6yr rule regarding a PPOR? I don't think this applys to IP's except for the 50% CGT discount if held for more than 1yr.

As for living in Oz for 6 months before selling....are you talking about the 'primary residence' thingy ?


No, i'm talking about being reclassified as a resident for tax purposes. I'm told that i must live in Oz for 6mths before i can be classified as a resident if i want to avoid paying more tax as a non-res.

If so, i thought it was 12 months you had to live in it ? I did this about 10 years ago and lived in a property for 12 months and then sold it for a 400k premium.....no tax....that was sweet.

There's no hard rule regarding this but most accountant's will advise it's safest to live in your PPOR for at least 3mths to re-set the 6yr rule. To help prove this you need to have utilitys connected in your name and all your mail posted to the same address.

I have a friend here that is the manager of a large international company, they have all these corporate and tax advice professionals for their execs as so many are expats working overseas....he is doing this at the moment and considering to sell his property or not.

Yes, I live in Thailand and it is much cheaper than Oz...doubt I could live back there now...but never say never.

I hear you! I'm also not sure i could live back in Oz.. i might come back one day but not today.
Click to expand...
 
Living in Asia

Hi Sam and Shuggy

Care to share how you two ended up living in Asia? Is this permanent?

I have always wanted to semi retire to Asia to do some volunteer work in a few years' time? But i need to get some idea of living costs .....and lifestyle options...how about young kids? do you have any and if so, how does one go about dealing with them? :eek:

Thanks for sharing....
 
virgo said:
Hi Sam and Shuggy

Care to share how you two ended up living in Asia? Is this permanent?

I have always wanted to semi retire to Asia to do some volunteer work in a few years' time? But i need to get some idea of living costs .....and lifestyle options...how about young kids? do you have any and if so, how does one go about dealing with them? :eek:

Thanks for sharing....
Click to expand...

Dealing with them !!!...lol....same as anywhere I guess, ya have the good and the bad.....mostly good until they hit 13yo.

I have lived here for 9 years now. I ended up here when my son was born and I decided to leave Oz for his good, I felt the Asian experience and respect for family was much stronger than in Oz. Plus all the reports in the papers in the few years prior to his birth and about schools and kids there left nothing but a bad taste. I hoped here might give him better opportunities and less exposure to all the bad stuff.

Now being here for 8 years and with 3 kids, it is a little different than first expectations, but mostly still all good thus far. Most expensive things here are good schools for your kids and health insurance which is essential.

I got here by weighing up all the pros and cons and selling my business at the time and reinvesting in a few things. The figures stacked up and I made the move. Have not regretted it so far.

My kids are half Thai, so this can essentially be there home as much as Australia can be.

Also the added benefit of the relationship I have with my kids is awesome, especially my son whom I have spent pretty much everyday with since he was born.

Asia is cheap, but like everywhere getting more expensive, but you can still live cheap. As an example, we can eat out at night for as little as the equivalent of around $10 for a family of 5, or we can glitz it up a bit with a huge seafood extravaganza at the right place for say $50/70 including beer for the family....but no beer for the kids...

We currently rent a house while we wait to build another....this place is around 300sqm with 3 bedroom and 3 bathroom and on a 1600sqm block for around $650 per month. Water is $13 for as much as we use. Electric is $60 per month usually but we do not have aircon.

A single guy can live very cheap if you adopt the countries way, if you want all the western foods and luxuries, then it is comparable to back home.

Hope that helps.

The key is to have some secure investments you can reply upon, or a job where you can work anywhere, online for example these days.
 
if you're used to the australian way of life.
living in asia is hard.

some countries - cultures and ways of life are far different.

Unless they're pushing out mega bucks for you to be there... it has to justify your means.

then again retirees are different.
 
Yes, retirees are different...sometimes older.

Of course Asia is different and so is Australia now.

It takes a certain type of person to become an expat.....its not for everybody, nor does everybody have what it takes. If a comfort zone is important to you, then forget it.

I hate rules and regs and their ridiculously strict over implementation. So, for me here it is good and I do not miss that from Oz. I mean, the other day I got stopped by the police for speeding, cost me circa $10 on the spot.

I overtook a police car the other day in town doing 80k's and nobody batted an eyelid.

Of course there is the good with the bad, but it all comes down to not abusing any of it and moderation.

Rules in Oz are put in place to protect you from you, both a nanny and police state at the same time in reality.

I built a bungalow on our farm 2 years ago, no permit, no building regs, nothing. I built a swimming pool in the river on the boundary by making a dam, again nobody knew about it except for me and the dozer driver until it was finished.

I like it, but it is not for everybody.
 
wouldn't say there is a super decline.. market adjustments.

but i suppose nothing beats lying on a thai beach as oppose to fighting the melbourne cold winds.
 
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