Removal of the Capital Gains Tax discount for non - resident

[firefox]

I am planing to go overseas for 5 years or more. I will rent out current PPOR. If I sell it in the future will I get any discount on GCT?

Will this new rule affect me? It was introduced 8 May 2012. My contract on the property was signed 24 April 2012 and the settlement 8 June 2012. Is it counting from the acquisition date or a possession/settlement date?

http://www.pitcher.com.au/Documents/Tax%20Bulletin%20-%206%20June%202013.pdf

 

[Terry_w]

I am planing to go overseas for 5 years or more. I will rent out current PPOR. If I sell it in the future will I get any discount on GCT?

Will this new rule affect me? It was introduced 8 May 2012. My contract on the property was signed 24 April 2012 and the settlement 8 June 2012. Is it counting from the acquisition date or a possession/settlement date?

http://www.pitcher.com.au/Documents/Tax%20Bulletin%20-%206%20June%202013.pdf

Yes you are likely to be adversely affected on any increase in value after 8 May2012

 

[Paul@PFI]

Non res

This change only affects non-residents for tax purposes. So the first key issue is "Will I be a non-resident"?

5 years with an intention to return "may" suggest you retain your residency since your propose to return. But it doesnt guarantee that outcome. Its a bit more complicated than that. ATO have a online residency tool. Actually they have two...Inbound and Outbound. Use the outbound. Just did one similar to yours other day to convince client he WAS resident. He insisted he wasnt.

CAREFULLY read and understand each question. Unsure oif what a word means click the hyperlink. One Q relates to "emigration" and it considers visa's. CLICK THE LINK TO DEFINE "EMIGRATE"....The visa cant be temporary or be subject to conditions. Must give a right to reside without restrictions, conditiosn etc. Basically you need to have a full & permanent residency. They arent that each to get in most developed nations. My client was PNG and they have given him residency for three years etc on his Visa. So he remains an Aust tax resident.

Careful and dont try to answer the questions with how you hope it is...You cant rely on final outcome if its based on rubbish in the question process.

If you are a non-resident its an issue which requires valuation as at may 2013. Then you would only pay CGT (not at a discount!!) on that portion. Well actually you would need a (high) valuation on date you depart and cease to be resident.

If you remain a tax resident then the 6 year rule kicks in. You can rent the house AND obtain a 6 year continuation of the Main residence Exemption provided you dont buy another main residence overseas. So when you return in under 6 years you can disregard CGT calcs etc. This assumes you move back in of course to restart the ordinary MRE.

 

[firefox]

Thanks for that

 

[Maidenvain]

Sorry to Hijack this post, but I have a question that Paul may be able to assist with.

As a NZ Citizen, I am here on a Non protected SCV. I am an Australian Resident for tax purposes, however as I am on a Temporary Visa (the non protected scv is considered temporary by the ATO), do you believe I am therefore

A) exempt from capital gains tax on sale of NZ property held for 16 years, and
B) exempt from paying tax in Australia on the rental income
and/or
C) I do not get the CGT discount on any Australian IP should I purchase?

If you believe the answers to all of the above are yes, then if I was to meet an Australian and become de-facto or married, would they all turn into 'NO'?

Thanks

 

[Paul@PFI]

Hmmmm

Temporary ?? Its not defined in tax law. Either is "permanent". A NPSCV (http://www.nzembassy.com/australia/...a/immigration-status-new-zealanders-australia) could be considered an Australian resident after a period of time....Question is when. I have a solution below.

Citizen...Nothing to do with tax residency. (USA uses a citizenship approach to taxation. Australia and NZ it is "residency" based. Residency for tax purposes isnt same as say a Visa. Its complicated.)

Tax residency has NOTHING to do with marital status.... You can be gay in a same sex relationship. Single etc. Australian tax law doesnt care. However, a person may influence their residency if they are non-res hereemp visa then marry and decide to stay here on a perm basis. It may trigger a residency issue by change of cirumstances. May be fatal from that event...Question may be when that event occurs ?? You question suggests you are linking marriage and residency for migration puposes which is seperate to tax. BUT they may correlate.

Try the ATO residency tool online. Dont try to answer questions how you like to answer it....It will skew the output and be wrong. Important you read the info on each question VERY carefully - Click the "i". Read it ALL. Then answer each question....http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=Resident.XR4&go=ok

If in doubt the ATO will confirm what it thinks your residency position is. Need to ask for a ruling.

I suspect you cannot answer all Yes or All No....

 

[Maidenvain]

Ive read that the ATO judge residency slightly different to immigration, centrelink etc. I have replied on the other thread. Thanks Paul