Resident & Non-Resident partners for a property - CGT Tax

[Melvin257]

Hi,

My brother who is a Non-resident and myself a resident of Australia, would like like to jointly buy a property.

I would like to understand what would be the tax implications, if we decide to sell at a later stage.

I am under the impression that if my brother buys the property by himself and if he decides to sell it in few years he will be taxed on a higher rate. How can I avoid this happening.

Regards,

Melv.

 

[Terry_w]

you each have distinct interests which will be treated separately.

 

[Paul@PFI]

Hi,

My brother who is a Non-resident and myself a resident of Australia, would like like to jointly buy a property.

I would like to understand what would be the tax implications, if we decide to sell at a later stage.

I am under the impression that if my brother buys the property by himself and if he decides to sell it in few years he will be taxed on a higher rate. How can I avoid this happening.

Regards,

Melv.

He cant. He has zero access to the CGT discount as a non-resident. The formula looks at every day of ownership so if he moves here later then he may have a pro-rata issue. He cant avoid it. You will if you are a TAX resident. He also pays tax on every dollar where you have a progressive scale of tax.

Its possible if the IP is neg geared he will accumulate losses which reduce the CGT dollar for dollar whereas you "neg gear".

If its done in a trust then withholding tax will be assessed. Its worse than personal ownership.

There is a way to get your outcome. You and he buy NZ real estate. On the final cap gain he will be exempt and only you pay tax - It would be a final tax rate of the Australian CGT. Hence he pays the NZ CGT rate (0%) and you pay 0% in NZ and then the discount cap gain in Australia. However it is subject to a general issue. If you intent is to profit from the sale then NZ may still tax it. Its a common mistake that people think NZ doesn't tax property profits. It does - It only exempts mere realisations which are capital gains. If you aim to to buy, hold a while then sell the problem can exist.

 

[soggy]

Also, if it's not an OTP (new) property, you may have to look at the Foreign Investment Board sides of things. If your brother isn't an Australian citizen, he may need to apply for permission from the FIRB.

 

[Paul@PFI]

Nobody else does