Next year I become an overseas resident!

[SeafordSunshine]

I have a terrace house in Surry Hills Sydney, and I am wondering should I pay off mortgages 1 ($43k) and 2($250k)
The $250 has an offset account with $250k against it.
The $43k has no offset.
Currently rented for $24k net.




I become an 'old married lady' and will live (for the time being) in a cold wet country... While my darling husband works really hard in a job. For the time being job will 'pay the bills"
We hope to return to Sydney when his job prospects improve
What I would like to ask in order to make this money work hard for me
Should I pay off these 2 loans
because I think the tax goes up a lot when you are a 'non dom'?
AM I better off to hang on to the cash?
(250k in offset) (60k in a 6% internet account)

thanks for any suggestions

 

[Peter_Tersteeg]

I'd say the fact you're moving overseas is largely irrelevant. This is really a quesiton of what's the best use of your money.

* If you reduce your interest (via paying off loans or using an offset), you will reduce your tax deductions which means you'll likely pay some tax.
* If you put your cash into a savings account, you'll have to pay tax on the interest earned in the savings account.
* If you put your cash into other investments, you'll pay tax on the profits from those investments.

That you're moving overseas may affect the way in which you're taxed, but whatever you do you'll have to pay tax on the profits of your investments. The question is really, what use of the money works best for you? I wouldn't get too hung up on the tax implications as they're largely the same.

If you decide that putting money onto the loans is the best strategy, I'd be putting the money into an offset account rather than directly onto the loan. Keeping money you've saved spearated from money borrowed via an offset account gives you more flexibilty from a tax perspective.

I'd also look to offset the loan against the property in which you will return to when you move back.

 

[Rob G.]

yes but ...

Interest income will only be taxed at 10% while net rental income will be taxed at 29% or more.

You will likely be paying tax on these amounts overseas though, hopefully with an offset for the tax paid here.

You have stated you will be a non-resident ... I hope that is based on competent professional advice.

Cheers,

Rob

 

[geoffw]

Figures are being mentioned without knowing what your income will be.

Fair advice about what is non resident. ATO have a very strict interpretation as to what is non resident. You have already sated that you intend to return. If the ATO knew that you would be regarded as resident no matter how long you were away. It may not even be to your advantage to be treate as non resident. For instance you may not be able to get negative hearing benefits if you are taxed overseas.

Try to work out what sort of income you will be getting while OS and get professional advice here before you leave.

You'll need to be arranging wills etc before you go anyway so arrange time with all the relevant professionals. It will be worth the spend.

 

[Rob G.]

Figures are being mentioned without knowing what your income will be.

Interest subject to withholding tax @10%, no deductions.

Net rentals subject to income tax at non-resident individual rates starting at 29%, no medicare levy.

Net rental losses will be carried forward, cannot set off against dividends or interest income.

Becoming a non-resident is a CGT event and needs careful planning.

Fair advice about what is non resident. ATO have a very strict interpretation as to what is non resident. You have already sated that you intend to return. If the ATO knew that you would be regarded as resident no matter how long you were away. It may not even be to your advantage to be treate as non resident. For instance you may not be able to get negative hearing benefits if you are taxed overseas.

You may depart for a fixed period intending to return and still be treated as a non-resident where a permanent place of abode is established overseas - see s.6(1) ITAA36 and a substantial body of case law.

Try to work out what sort of income you will be getting while OS and get professional advice here before you leave.

You'll need to be arranging wills etc before you go anyway so arrange time with all the relevant professionals. It will be worth the spend.

Do not rely on the ATO general website, it is extraordinarily misleading and gives the impression that it is trivial to become a non-resident.

Personal professional tax and financial advice is needed prior to departure, maybe even prior to signing any contracts for employment or accomodation etc.

Cheers,

Rob

 

[SeafordSunshine]

Non Dom

Income will be $600 pw gross (rent) from terrace
(rent) in Australia, I wont be working in UK.
I never earned enough to negative gear
thanks
Seaford Sunshine