dp

Hi I was wondering if I could get some advice.

We are living in Perth and are in a position to consider an investment property for current and future income. As my partner is from Scotland, we would like to consider taking advantage of the higher australian dollar, current OZ job certainty and lower property prices in the UK to buy an investment property in Edinburgh or Glasgow. We have family there that could aid in any emergencies and we know the areas. It would also be good to have an option in our (and young son's) future if we wanted to live abroad.

Does anyone have any advice on how to go about getting this. Do we need an assie mortgage or UK one? How would we be taxed on any profits? Do they have negative gearing in the UK in regards to investments?

If anyone knows of a reputable tax agent in Perth that could assist us with this please provide the details.
Cheers

Beoz

I think your idea is mostly a good one. I'd feel more comfortable about UK property rising over the next 10 years than Oz property.

Be careful of getting a foreign mortgage. You're messing with exchange rates then. Bare in mind that if this is an investment property you would hope that most of the mortgage is paid by tenants, which is in pounds. The $A is a very volitile currency and if it were to dive in 5 years time your mortgage could cost a fortune.

xzibit

You can buy a decent property in Scotland for about $50. So no need for a mortgage.

In Exile

we just did this.
Instead of buying a 2 bed flat in Sydney we ended up using the 20% deposit and buying a 3 bed victorian terrace in lancashire outright. Currently rented at 700 a month I believe.

Unfortunately I cant comment on mortgages. However (anecdotally) a friend of mine recently bought a two bed flat in Clapham and got a UK Mortgage. I believe it was a Nat West Ex Pat mortgage, though he did have to jump through some hoops to get it.

The house buying process was made much easier by families to do the inspections and whatnot.

edit: I should add that the driver for this was the currency exchange rate, and speculation that the GBP will crawl back up and the AUD will fall down over time

dp

Thanks for the info. Did anyone help you proceed with this from the UK or Australia?
Do you have any advice on the tax angle? We would hope to recoup some of our expenses against the profits (if any) and are happy to add this to our Aussie tax as we are both permanent residents.
We too are looking to make the most of the current AUD hike (having been around for a few highs and lows) and plan to be conservative with our expenditures so not to stress ourselves too much.

Beoz

You will pay tax on income - either to the UK or Oz tax people. Probably where you are resident. There is a double taxation agreement between UK and Oz but not sure of the fine print on that. The ATO website has some examples. If you are resident in Oz you may be able to negative gear. Best get an accountant to look over it. Probably not a DIY task.

DownUnderPaddy

LOL !

dp

Cheers Beoz - am definitely going to get an accountant but trying to find one that knows about UK and Aussie taxes!

Beoz

These guys do UK and Oz tax. http://www.gomatilda.com/

I find it hard to believe there aren't more that specialise in this area.

JAJ

Do they have negative gearing in the UK? Your question suggests you are planning to make a loss on your investment. Shouldn't you be planning for a profit?

The UK - and most other countries - does not allow the insanity of so-called "negative gearing". Instead, your rental losses can only be set against other similar profits. But in any case, you would be unlikely to have any UK income tax to pay (if you have no other income in the UK) because you can still claim a personal allowance.

Can you claim a loss on a UK rental property against your Australian wage/salary income? That's a question you need to work out with a good Australian tax accountant.

tomar

Hope this works out for you. We wanted to buy a small house last year near our son in UK, and had absolutely no luck getting a mortgage as we didn't live in UK any more. We would have had to lie about our intentions to move back to UK permanently. We had over 50% cash for the deposit, so only needed a very small mortgage as it was a very small house, and to be honest have a good income. We were turned down by everyone, including the bank we have been with for years and years, and with whom we still had a small mortgage with for another UK house, and had never missed any payment or been in debt. Couldn't believe that it was impossible, as we have several properties in UK that we rent out, so plenty of collateral, and a good track record. Times have changed unfortunately and money seems very tight.
Hope you have better luck than us.

isgraham

Yes they changed the law to allow negative gearing against foreign investment properties about 2 or 3 years ago.

jan

I guess the question is where to raise the money to be most beneficial. I would raise the money in Australia and buy the property outright in sterling therefore making the most of the strong $ at point of purchase.
Also it is unlikely the rental income will be higher than your combined u.k allowance although you may have to pay by your agent or tenant 25%tax which you will then have to claim back although you can often obtain an exemption certificate. Check hmrc web site regarding overseas landlords.
It would be unwise to have to change money up in either direction thats why if poss complete outright purchase now in $ and leave all rent in u.k. accounts for years if need be before transferring when a better rate is achievable. It may be possible to lose much of the money earned by paying a member of your family to manage the property and they could give you a gift every so often