Tax implications for bringing money from UK to Australia.

[hudbry]

Hi there.
I'm a British citizen, but permanent resident of Australia. I've been living here in Oz for over 5 years and plan to stay forever.
I have an investment property here in Sydney as well as one back in London.
I've recently heard that the UK tax office are changing the rules meaning that all non UK residents will be liable for capital gains as of April next year (start of financial year).
I'm therefore looking at the option of selling my London property, avoiding capital gains there, and bringing the funds over here to Australia (between $AU 80-150K) where I can invest it into the property market here.
My questions to you are:

What are the things I need to take into consideration when doing this?
What are the tax implications of bringing my money over from abroad? Will it be classes as income, will it be liable for CGT?
Should I keep the money over in the UK and bring it over as and when I need it, or bring it over in one lump sum?
Any thoughts, suggestions and pieces of advice from you to help me make the right decision would be warmly welcome.

Many thanks.

 

[James Bond]

Interesting one, isn't it. I'm in a similar position, although I'm not selling at this stage.

I reckon that if you sold in the UK and met your CGT liabilities there (even if they were ?0.00), then you could bring the money over here with no income tax or CGT owing.

Also, as a British citizen, even though you are living abroad, you are entitled to the tax-free income threshold which is about ?10,000 pa. I have yet to do an Australian tax return which reflects this, see how we go this year!

JB

 

[Terry_w]

What are the things I need to take into consideration when doing this?
What are the tax implications of bringing my money over from abroad? Will it be classes as income, will it be liable for CGT?
Should I keep the money over in the UK and bring it over as and when I need it, or bring it over in one lump sum?
Any thoughts, suggestions and pieces of advice from you to help me make the right decision would be warmly welcome.


You will probably have to pay CGT here on the UK property.
Bringing cash in is not income
Think of the asset protection issues of bringing money in
seek legal and tax advice before doing anything - especially if this is just a rumour about the UK tax.

 

[hudbry]

Thanks you guys.
It seems a little harsh that if I'm not liable for capital gains tax in the UK, that I will be hit here in Australia.
What are the incentives for me bringing money into Australia to invest in the market then?
Since I've owned my UK property for longer than 12 months, am I right in saying that I'll be taxed at the lower CGT level? Can someone remind me what then is?
I'll shall look into asset protection, but if anyone can advise me further on it is be grateful.
What are the tax rules about "gifting" money?
Many thanks.

 

[hudbry]

Having looked at this site:
www.exfin.com/australian-capital-gains
It states :
"Individuals emigrating to Australia will normally be deemed to be residents of Australia for taxation purposes from the date of their arrival in Australia. Australia’s CGT rules will then deem you to acquire all your CGT assets that are not already Australian taxable property; on the date of your arrival for their market value at that date. You will then be subject to Australian CGT on any subsequent disposal of those assets."

Am I right in saying then that CGT is then based on the value of my property in the UK at the time I entered Australia. So if I've owned the property for 10 years, but have only lived in Australia for 5, it's the value of the property 5 years ago versus it's value now?
Am I reading that right?

 

[Terry_w]

You should seek tax advice rather than rely on a website, but I believe that may be the case. There may be a few strategies you could use to reduce tax.

Gifts are generally tax free in Australia

 

[Paul@PFI]

1. Are you actually a tax resident here ? It may seen the case but should not be assumed. Possessing a perm residency visa is NOT in itself a criteria for tax residency.

2. If you are a tax resident of Australia then Aus tax (CGT) will apply and it is based on the change of value between the arrival date etc. 50% taxed by adding to your other income so the rate is your marginal tax rate. The main residence CGT exemption may also apply to some period of time if you prev lived in the London property and/or depending if you acquired a home here. There are some choices in this area and so advice that guides those choices will assist. ! The DTA with UK should prevent elements of dual taxation. But it is messy to do it the right way.

3. Have you declared the London rental income in your Aust tax return ?? While UK may seek to tax it based on source, Australia will also seek to tax it based on residency which prevails. The DTA with UK recognises that Aust will allow a credit for foreign tax paid on that same income (subject to date differences in tax periods !!)

4. ATO & HMR&C exchange data freely and BOTH already exchange details on assets, property, income, rents etc. There is a major push happening to detect foreign propery owned by Aus tax residents not reported in tax returns. UK is one of 40+ countries now sharing that info.

5. Repatriation of $$ between countries WILL be a noted issue by Austrac and the UK equivalent. There is a big push to monitor these sorts of issues and a "please explain" letter could follow. But its not a concern where the source can be established and Aust are later satisfied that it was attributed to property and that taxes etc are OK then that would be the end of it. Its not a crime to bring your $$ with you. I would avoid holding $$ in a UK account now that tax authorities see this as a concern. Its not illegal - Its just a issue that highlights suspiscions and leads to questions.

I would avoid websites that address "expat" tax. Some of them are truly appauling and seek to present a simple tax issue as something far more complex. Seek local tax advice specific to your circumstances.

 

[hudbry]

Thanks Paul, much appreciated.
Lots to think about here. Have some answers to your questions here:

1. Yes I am a tax resident here. Work full time and compete a tax return every year.

2. This is the one I'm most confused/concerned on. I'm not sure what you mean by "marginal income":
The property prices in London went up substantially in the last year, which basically means the CGT is going to be bigger I guess. It looks like I might be except to UK CGT. Does that not mean that I ships be here with the dual tax agreement. Seems like dodging one fire in the UK, to only leap into another one here in Oz.
My gross salary here in Oz is $91,000. By selling the UK property am I going up into the top tax bracket.
I bought a property here in Sydney 2 years ago, in my name, and sold it a year later. Have recently bought an investment property in joint names with my wife, and still have it. Does this therefore mean I can't claim main residence exemption to there ochre in the UK? I bought it back in 2001, lived in it for 3 years, moved abroad for a year where I rented it out, moved back to the UK. Lived in it again for a year, and then been abroad since, with our being rented out.
What is the best way for me to proceed now?

3. I have not declared the UK rental income here in Oz. I was unaware I had to to be honest. I compete UK tax returns every year and thought that that was my only responsibility. As it happens I don't actually pay tax due to threshold and mortgage interest driveability.
Thoughts?

 

[wategos]

If Australia doesn't know about the UK property don't tell them anything. Bring the money over slowly through different channels. This is what most people do (not me of course) and never get caught.

 

[Terry_w]

If Australia doesn't know about the UK property don't tell them anything. Bring the money over slowly through different channels. This is what most people do (not me of course) and never get caught.

Tax fraud is not advisable because it is a crime and there are civil penalties as well. There is also ever increasing data sharing between countries - especially first world commonwealth countries. If it was Laos then the chances are very slim but the UK the chances of getting caughter are getting higher each year.

 

[Ed Barton]

If Australia doesn't know about the UK property don't tell them anything. Bring the money over slowly through different channels. This is what most people do (not me of course) and never get caught.

I recommend 500 euro notes inside condoms, swallowed. Don't eat anything spicy or acidic on the flight and perhaps take some ADM.

 

[James Bond]

I recommend you contact Alan Collett at Go Matilda. www.gmtax.com.au

His company specializes in people that have UK and Australian income and tax liabilities.

JB

 

[wategos]

Tax fraud is not advisable because it is a crime and there are civil penalties as well. There is also ever increasing data sharing between countries - especially first world commonwealth countries. If it was Laos then the chances are very slim but the UK the chances of getting caughter are getting higher each year.

I know people that have undeclared rental income on debt free properties in Oz that have been getting away with it for over 10 years, and transferring the funds to the UK (the reverse of the scenario discussed). Australia has no way of tracing rental income and I have little faith in the authorities of detected these scenarios. It?s all bluff.

 

[Terry_w]

I know people that have undeclared rental income on debt free properties in Oz that have been getting away with it for over 10 years, and transferring the funds to the UK (the reverse of the scenario discussed). Australia has no way of tracing rental income and I have little faith in the authorities of detected these scenarios. It?s all bluff.

Please tell me their names and/or adddresses so they can be reported.

Yes there are many people evading tax inn this country, and even laundering the proceeds and benefitting foreign countries - we have to stop them if we can.

 

[coastymike]

I did a lot of work with clients who were part of operation wickenby.

Note the ATO and commissioner of public prosecutions dont go easy when someone is found to have undeclared offshore income.

Be aware as well they technically can issue another person with a section 264 notice for you to disclose all information you have on other parties affairs. Non disclosure means you could be charged with aiding and abetting.

A phone call to michael oneill head of serious non compliance unit regarding a thread could make it interesting.

Detection many times is from people dobbing friends or relatives in. Somersoft is well known to the ATO. Its part of their information gathering for what is happening in the property sector and any schemes happening in that respect.

 

[Ed Barton]

Detection many times is from people dobbing friends or relatives in.

I'd say that's how most 'naughty' things are detected.
Neighbour dobbing in overcrowded house or illegal gf or structures.
Ex lover dobbing in tradie doing cashies.
Ex lover dobbing in ex who now has an undeclared new partner but sill claiming centre-link as single.
Etc. etc etc.

 

[Terry_w]

I'd say that's how most 'naughty' things are detected.
Neighbour dobbing in overcrowded house or illegal gf or structures.
Ex lover dobbing in tradie doing cashies.
Ex lover dobbing in ex who now has an undeclared new partner but sill claiming centre-link as single.
Etc. etc etc.

Ex-spouses are the greatest source of intelligence to the police agencies and I imagine tax office. Bittnerness is a great motivator.

 

[wategos]

Somersoft is well known to the ATO. Its part of their information gathering for what is happening in the property sector and any schemes happening in that respect.

It wouldn?t be hard for the ATO to do something about it .. like require real estate agents to associate clients with Tax File Numbers the same as bank accounts and share holdings are. An annual submission from agents to the ATO associating TFNs with rental income could then be easily cross referenced.
Don?t have a TFN ? then 30% non-res tax thanks.
The revenue boost would be huge. Other countries do this, why not Australia ?

 

[Terry_w]

It wouldn?t be hard for the ATO to do something about it .. like require real estate agents to associate clients with Tax File Numbers the same as bank accounts and share holdings are. An annual submission from agents to the ATO associating TFNs with rental income could then be easily cross referenced.
Don?t have a TFN ? then 30% non-res tax thanks.
The revenue boost would be huge. Other countries do this, why not Australia ?

It would be hard as the laws prohibit this at the moment. The ATO like others can only do what is lawful. If the laws were changed it would be easy to implement. But they can easily cross reference with names on title and they are collecting this information now. Some people even get letters to ask why they hadn't declared CGs in their tax returns on the sale of a property.

Income can be checked by bank statemetns and by cross referencing with the rental bond board. Land tax - OSR -can do this too.

 

[Paul@PFI]

I know people that have undeclared rental income on debt free properties in Oz that have been getting away with it for over 10 years, and transferring the funds to the UK (the reverse of the scenario discussed). Australia has no way of tracing rental income and I have little faith in the authorities of detected these scenarios. It?s all bluff.

No its not. Any and all currency exchange transactions and offshore transfers in/out are all captured. Most aren't a concern. I recently had a client inherit from parent who died in UK and a series of please explain letters issued to enquire into the nature of the deposits issued. What triggered it was the UK property was transferred into kids names after death then sold a few months later.

They had to provide a UK Notary letter and copy of the will before it was closed. This was $150K...And a taxpayer with a normal job.

Our tax system is based on self assessment. Taxpayers who dont declare rental income often get detected. Its like the Barrister who didnt lodge for 20-30 years. You eventually appear on radar.