Tax implications for bringing money from UK to Australia.

[hudbry]

Hi all.
Thank you all for your input. Much appreciated.
Sorry for the absence, but I have been waiting on some answers from my accountant in the UK and also financial advisors here in Australia regarding my situation so that I can make the correct and ethical decision.
Having spoken to them the following seems to be the case. I'd appreciated your thoughts on them as two heads are better than one as they say:

UK: as long as I confirm that I am definitely a non UK resident, I will NOT be liable for Capital Gains Tax on the sell off my property prior to April 2015.

Australia: the rule seems to be in line with selling a property over here in Australia: as long as I lived in the property in the UK once I purchased it (which I did, for 3 years) and have not lived away from it for more than 6 years (at the moment only 5), I will not be liable to pay Capital Gains Tax on the money I bring into Australia from the UK on the proceeds of the sell.
It might well be the case that the ATO will notice the transfer and ask for clarification, but as long as I can prove these points I should be fine.

So far so good........
All this being well and good, and knowing that I have done the right thing with both Tax departments regarding CGT I have a couple of questions that I'd like your input on:

* are there any other taxes that I need to be aware of when bringing money in from the UK to Australia?

* will the money be seen by the ATO as income and therefore will I be taxed at a higher rate for that year?

I presume that if the CGT issue has been dealt with, then there should be no other ties I need to be aware of?

Thoughts please?

Thanks.

 

[Terry_w]

Hi all.
Thank you all for your input. Much appreciated.
Sorry for the absence, but I have been waiting on some answers from my accountant in the UK and also financial advisors here in Australia regarding my situation so that I can make the correct and ethical decision.
Having spoken to them the following seems to be the case. I'd appreciated your thoughts on them as two heads are better than one as they say:

UK: as long as I confirm that I am definitely a non UK resident, I will NOT be liable for Capital Gains Tax on the sell off my property prior to April 2015.

Australia: the rule seems to be in line with selling a property over here in Australia: as long as I lived in the property in the UK once I purchased it (which I did, for 3 years) and have not lived away from it for more than 6 years (at the moment only 5), I will not be liable to pay Capital Gains Tax on the money I bring into Australia from the UK on the proceeds of the sell.
It might well be the case that the ATO will notice the transfer and ask for clarification, but as long as I can prove these points I should be fine.

So far so good........
All this being well and good, and knowing that I have done the right thing with both Tax departments regarding CGT I have a couple of questions that I'd like your input on:

* are there any other taxes that I need to be aware of when bringing money in from the UK to Australia?

* will the money be seen by the ATO as income and therefore will I be taxed at a higher rate for that year?

I presume that if the CGT issue has been dealt with, then there should be no other ties I need to be aware of?

Thoughts please?

Thanks.

Dont forget you can only have one property exempt from CGT at any one time. If you claim the UK house as your main residence then the Australian house cannot be exempt from CGT at the same time.

This statement is misleading:

I will not be liable to pay Capital Gains Tax on the money I bring into Australia from the UK on the proceeds of the sell.

It doesn?t matter whether you bring the money here or not. It is the sale that triggers CGT.

There are no taxes on transferring money or gifting or receiving a gift unless that money is not really a gift. In this case it is your own money anyway.

 

[hudbry]

Dont forget you can only have one property exempt from CGT at any one time. If you claim the UK house as your main residence then the Australian house cannot be exempt from CGT at the same time.

This is an interesting point. Thank you Terry.

* How does the ATO look on someone's property as their primary residence then?

* How does one "claim" a property as their primary residence?
It was my only home in the UK and was the first property I ever bought and owned.

Thanks.

 

[Terry_w]

Dont forget you can only have one property exempt from CGT at any one time. If you claim the UK house as your main residence then the Australian house cannot be exempt from CGT at the same time.

This is an interesting point. Thank you Terry.

* How does the ATO look on someone's property as their primary residence then?

* How does one "claim" a property as their primary residence?
It was my only home in the UK and was the first property I ever bought and owned.

Thanks.

Sounds like you could claim it as the main residence. This will be determined by a number of factors such as your residential habits - did you live there stay there have electricit on, drivers licences et at that address.

But where did you live in Australia durin the cross over time.

election is only made in the tax return of the year of incurring the gain.

 

[hudbry]

Sounds like you could claim it as the main residence. This will be determined by a number of factors such as your residential habits - did you live there stay there have electricit on, drivers licences et at that address.

But where did you live in Australia durin the cross over time.

election is only made in the tax return of the year of incurring the gain.

That's encouraging:

* yes I lived in my UK property for 3 years after I bought it back in 2002. I then travelled backpacking for a year, followed by a year living and working here in Australia on a one year working holiday visa. Then went back to the UK and lived in my flat for another year or two before coming to live permanently here in oz.
I paid electricity bills, council rates etc etc and whilst there, my driving licence was registered there too. Might be tough to find all that documentation now though as it was a while ago now.......!!

Thanks again.

 

[hudbry]

Dont forget you can only have one property exempt from CGT at any one time. If you claim the UK house as your main residence then the Australian house cannot be exempt from CGT at the same time.

A couple of questions on this please:

* If I am able to declare my UK flat as my primary residence and sell it, I presume my Australia property then becomes my primary residence?
A theoretical scenario:
* If I bought the Australia property a year ago for lets say $200,000, it's valued today at $250,000. I sell my UK property today as primary residence. Now, 4 years later, I want to sell my Australian property. It sells for say $300,000.
- Am I liable for CGT at all on any of the gain?
- Is CGT payable on the $50,000 gain from $200,000 - $250,000 valuation when my UK property was declared as my primary residence?
Thanks.

 

[Terry_w]

A couple of questions on this please:

* If I am able to declare my UK flat as my primary residence and sell it, I presume my Australia property then becomes my primary residence?
A theoretical scenario:
* If I bought the Australia property a year ago for lets say $200,000, it's valued today at $250,000. I sell my UK property today as primary residence. Now, 4 years later, I want to sell my Australian property. It sells for say $300,000.
- Am I liable for CGT at all on any of the gain?
- Is CGT payable on the $50,000 gain from $200,000 - $250,000 valuation when my UK property was declared as my primary residence?
Thanks.

Assuming you live in the Australian property and it meets all other requirements then yes you could claim it as the main residence, but not for any overlappying period.

your Australian property would probably be such to CGT. Probably the valuation wouldn't matter but a % of the time it wasn't exempt divided by the time held.

Check with your tax agent about the spcifics for your situation.

 

[hudbry]

Assuming you live in the Australian property and it meets all other requirements then yes you could claim it as the main residence, but not for any overlappying period.

Thanks so much Terry for your knowledge.

If we lived in the Australian property for a while after buying it, but due to changes in circumstances (child and new job) we moved out and began renting it out, would that still be OK?

Cheers.

 

[Terry_w]

Thanks so much Terry for your knowledge.

If we lived in the Australian property for a while after buying it, but due to changes in circumstances (child and new job) we moved out and began renting it out, would that still be OK?

Cheers.

Under s118-145 itaa97 you can count you main residence as your main residence for up to 6 years of absence if rented.

 

[Paul@PFI]

BUT.......
If you exceed it by one day or cant access the MR exemption then if you are a non-resident you lose the 50% CGT discount that arises after 15 May 2012 (and or the date it commences to become taxable)

The loss of the 50% CGT discount is a game changer for non-residents. It can be better to elect the property not sold as the MR in some cases. Just remember BOTH UK and Australia have introduced similar tax rules and both closely share data. Personal advice is the best advice I can suggest.

 

[hudbry]

Thanks Paul.
I'm classed as a non resident in the UK but am a permanent resident here in Oz. I have been for years now so whatever happens, in the worst case scenario, as long as I keep the Oz property for 12 months I should be able to get the 50% reduction in CGT.

 

[Ed Rutherford]

Tax implications of bringing in equity release funds

I've got two questions on a variant of this:

I'm on a 457 visa with permanent residency about to be granted. I have a property in London which has significant equity in it. The property is rented and declared in both HMRC and ATO filings.

1. Are there any tax liabilities of freeing up some equity (but not selling the house) and bringing to Australia in order to fund purchase of a property here?

2. What bodies should I notify, if any, of a cash movement estimated at around $400k?

 

[Paul@PFI]

1. When are granted perm residency you become a tax resident on that date. I'm not sure you are correct with declaring rents to the ATO at this time. Temporary residents who hold a 457 are excluded from requirements to include foreign income in Aust returns. They only show the 457 income and resident interest and dividends etc.

There are special CGT considerations and superannuation considerations to determine when you become a perm res. You have a six month window to transfer super.

2. You don't have to tell them anything. They monitor it automatically (Australian Transaction Reports and Assessment Centre) = AUSTRAC monitors and reports to agencies ALL foreign currency movements. Some are ignored and others grouped and a "please explain" can occur at any time. Transfer of funds isn't illegal. They seek to identify illegal use or illegally obtained proceeds.

Keep records. If the $400k was UK savings there is no issue. If you cant prove the source it could be proceeds of crime, drug proceeds etc. I have had clients asked about many sources:
- One pinged for a transfer from a foreign pension fund (remember once a tax resident that is income taxed here)
- Another asked about proceeds from a middle east country. Was a parent loan but it required the parents to attend a consulate to discuss with a "Consular" official. The recipients interviewed by Federal Police. Both agreed it was OK.
- Another subject to Wickenby allegations
- Another was an inheritance. They saw the UK will and were fine with it.

 

[hudbry]

Think of the asset protection issues of bringing money in......

Hi there Terry.

Could you kindly expand on this point of "asset protection issue of bringing money in....."

Many thanks.

 

[hudbry]

1.

2. You don't have to tell them anything. They monitor it automatically (Australian Transaction Reports and Assessment Centre) = AUSTRAC monitors and reports to agencies ALL foreign currency movements. Some are ignored and others grouped and a "please explain" can occur at any time. Transfer of funds isn't illegal. They seek to identify illegal use or illegally obtained proceeds.

Thanks for that Paul.
I'm now in a position now to transfer funds. I don't have anything to hide as all funds are legal, but I'm looking for the best way of transferring the funds to Australia. The best deal appears to be a specialist forex company rather than a bank.
Is that something that AUSTRAC monitor as well?

On another note, after the sale of the property I have about ?90,000 to transfer. ?50,000 of that was originally given to me as an early inheritance by my mother. I wonder, if I am indeed liable for capital gains, will this be taken into consideration as well? I used the ?50,000 as the deposit for the property I have just sold.
Many thanks in advance.

 

[Terry_w]

Hi there Terry.

Could you kindly expand on this point of "asset protection issue of bringing money in....."

Many thanks.

Consider the clawback provisions in the bankruptcy act. Once it hits hte acccount of A it could later be clawed back if Mr A transfers it to Mr B or to a discretionary trust. If might be worthwhile planning who holder of the cash will be. Further planning may involve who this entity will lend to...

 

[Terry_w]

Is that something that AUSTRAC monitor as well?

.

All financial transactions are captured by AUSTRAC - except perhaps the underground banking systems such as hawala and Feichien.

 

[hudbry]

Consider the clawback provisions in the bankruptcy act. Once it hits hte acccount of A it could later be clawed back if Mr A transfers it to Mr B or to a discretionary trust. If might be worthwhile planning who holder of the cash will be. Further planning may involve who this entity will lend to...

You're losing me a little here Terry. Sorry.
Transfer funds to a second party and then second party returns / lends it as a gift?
Does bankruptcy have to be declared?

Better to transfer in one lump sum or in smaller amounts?
Many thanks.

 

[Terry_w]

You're losing me a little here Terry. Sorry.
Transfer funds to a second party and then second party returns / lends it as a gift?
Does bankruptcy have to be declared?

Better to transfer in one lump sum or in smaller amounts?
Many thanks.

Just consider that bankruptcy could occur at some stage and think of strategies to increase protection. You should always seek legal advice before receiving any largish sums of money.

 

[hudbry]

Just consider that bankruptcy could occur at some stage and think of strategies to increase protection. You should always seek legal advice before receiving any largish sums of money.

I have already received the funds and am now looking to transfer. Am I to late then? What are my options?
Thinking the Aussie dollar might get a little weaker so just waiting for a bit........