Rachelanna

If you have to operate under Australian tax rules you need to get a valuation of the property from the time of it becoming a rental property so as to calculate capital gains tax when you sell it. We have just obtained one in conjunction with a depreciation schedule for
an investment property. The cost of the depreciation schedule is well worthwhile.

centennial

Many thanks to everyone for your reply.

In the end we have decided to sell the flat and use it as deposit for our new home in Australia.

We have bought this flat in Oct,2012 for £122k and spend around 4-5k on renovation. This property has been our primary residence (no other property owned). We are selling it for £150k plus now (thanks to price boom in London area).

I am wondering if we need to pay capital gain tax on the profit as this is our primary residence and we are planning to use the sum to buy new home in Sydney.

any idea on CGT please ?

HSmart

If I may say something, I would NOT sell any property in the UK. If, by any chance, you decide to return to the UK (like me for instance) you will be mighty happy that you didn't. But of course, it is your choice and my best wishes of good luck, whatever your choice.

Alfresco

You won't pay CGT in the UK or Oz on it as it was your primary residence AND you will have sold it before becoming a Oz tax payer. Just send the money over to Oz before you arrive and it will be in your bank account here waiting for you.

Beoz

I'm amazed at how many British expats I speak to have rental properties in the UK and don't declare on their Oz tax returns.

NickyC

If they're on temp visas they don't need to. It's those who have PR who will have a problem.

They'll have to keep those properties a secret from the ATO for ever. They'll never be able to regularly send the rental income to Australia and they'll never be able to sell them and bring the funds over. Not without triggering plenty of questions and possibly a little audit from the ATO, anyway..

Beoz

They are PR.

Alan Collett

Maybe direct such persons to the ATO's Project Do It:
https://www.ato.gov.au/General/Corre...treaty_network

What some may not also know is that a tax deduction can be claimed on UK property for depreciable items, and if this generates a rental loss the loss can be offset (negatively geared) to generate a tax repayment in Australia.

Best regards.

Beoz

But due to no negative gearing in the UK many rental income from properties covers the mortgage and more. Which is the way an investment should be. Rather in Australia where the taxpayer foots the bill. That rubbish needs to stop. The only people that benefit are the investor and the renter - people like me who get to live in 1.3 million dollar property for next to nicks. I'd still rather see NG abolished. Its unfair.

Alan Collett

So are you not persuaded by the argument that negative gearing and the CGT discount creates investment in property that in turn increases the number of rental properties?

If this is a good thing, why would you do away with it?

Remember also that for Australian property the interest paid by an investor is interest received by the lender - on which the lender (eg a bank) pays tax.

Best regards.

Beoz

Why does NG increase the number of rental properties? All it does is create a massive gap between rent and mortgage repayments. Without it that gap would decrease. People would still invest. Or better asked, why would they not invest without NG? Sure you may say it wouldn't be worth investing upon its removal, but the market will eventually sort itself out leaving those who pay tax and don't want to support a discriminatory benefit better off.

paulry

That's an interesting one, and I've heard it a few times since I've lived in Australia. I disagree because without NG, house prices wouldn't be so pumped up - meaning that more people would be able to afford to buy and resulting in less demand for rental properties.

Alan Collett

... and with a fall in demand for property you might reasonably anticipate property prices would also fall.

Now some would say that is a good thing.

Others might have a concern about the wider impact on the economy of prices being stagnant or falling in the housing sector.

Best regards.

Alan Collett

An issue of more pressing concern - IMO - is investment in Australian real estate from overseas and the failure on the part of the FIRB and the ATO to get on top of the issue.

There seems to be a complete lack of control over compliance with FIRB regulations and the reporting of income tax (on rentals)/CGT (on disposal) by non residents.

Best regards.

paulry

There's always going to be those unexpected consequences. I wonder if the cheaper rentals was the original intention of NG or whether it was intended to create a boom in the property sector? One thing for sure is the average one home owner is more indebted to the banks than ever before and for first time buyers, unless they're on a meaty income its harder than ever to get onto the housing ladder.

Regards.