Off the plan Dubai and capital gains tax help

[DoobyNuts]

Hi Somersofters,

- In Dec 2005 I purchased an apartment off the plan for investment purposes in Dubai for $100k. I was a non-resident for tax purposes when I signed the contract but became Australian resident again in 2006.

- I paid $50k of the $100k from 2005-2008 in instalments with the remaining $50k to be paid on handover which will finally be Dec 2014. No Loan.

- If I sold it on handover I would get $150k for it.

So ...... what happens in regards to tax implications if I sell it.

1. Do I pay capital gains tax on 50k? Or does the valuation start from when it is completed?

2. When I transfer the 150k from Dubai to Australian bank account are there any issues with this?

3. Can I claim any deductions or anything like that?

4. Any other issues that you can see with the above situation?

Cheers,
Dooby

 

[Terry_w]

Probably the cost base would be the value at the date you became a resident. CGT would be payable in Australia (over there ?) and you could claim all costs you haven't otherwise claimed.

Generally no tax issues with bringing your own money in from overseas, but you are bringing it from on jurisdiction to another so there are issues such as estate planning, asset protection etc to consider.

 

[Paul@PFI]

Have you declared the income each year ?? An Australian tax resident has to pay tax on worldwide income. Australia and UAE don't have a double tax treaty and it is possible BOTH may want to tax the income and any capital gain. There is no apparent tie-breaker that credits the tax paid in one country with the debt for the other. You may actually break both countries law and both countries may consider your sale a concealment.

The repatriation of the net sale proceeds is a foreign transfer both countries routinely monitor. Its only illegal if you haven't followed the tax & foreign currency laws on each country.

There is a CGT event on commencing Australian residency. You should obtain advice as this can be a serious problem. You may need to make disclosures to the ATO to avoid a Austrak report of foreign income when you sell !!

You said "became a AUS resident again". This may indicate a problem issue. Many taxpayers incorrectly consider themselves non-resident when they have actually retained AUS tax residency while living overseas and receiving exempt income (s23AG in its day). You may not have satisfied the rules of being a non-resident. Its uncommon UAE allows Australians true residency. You may have had a working visa or temp residency. That's NOT the same. Hence you may make a flawed assumption about CGT and even investment income tax in each year.

 

[DoobyNuts]

Thanks for the reply Paul.

As far as I know:

- There is no income tax or CGT in the UAE so there shouldn't be any issue when it comes to selling. If I sell for 150k I can do as I please with the entire amount without any issues whatsoever from UAE tax authorities.

- I was out of Australia for 4 years back then (UK, Russia, UAE) and had no financial, property or family ties to Australia to have a domicile there and only returned a couple of times for holiday. My domicile for Australian tax purposes was UAE regardless of UAE residency status. I think the 91 day rule applied anyway back then so there shouldn't be any issues there that I can think of as far as Aust tax residency goes.

- I bought it when everyone was flipping off the plan property as prices were going nuts. So lets say I bought it for 100k in 2005 and 2 months later it was worth 150k while I was still non-resident and when I became resident of Aus for tax purposes in 2006 it was also worth $150k. . Then over the course of the next 9 years it fluctuated from 250k down to 50k (its otp so im only guessing) and now it's worth 150k again when I go to sell it.

So based on what you said and the above scenario my CGT event should be $0.

How could I even prove what the value of the OTP was when I commenced residency? There is no past sales history websites or valuation systems like in Australia. All I have is very short contract and a receipt from the developer (this is quite common in Dubai).