House Proceeds/Tax taking them into Oz
 

Hello out there.

Slightly technical question on house proceeds and taking them into Oz.

The situation is :
My wife and I are joint owners of our house in the UK. She is an Australian passport holder and citizen. We are leaving the UK on 28 September, staying in Singapore 5 days, arriving in Brisbane for good on 4 October. We have sold our house (going through the legal process now - no contracts signed or anything yet). It is our only house and main residence.

The questions :
1. If the sale falls through and we have to start again, we will still leave on 28 Sept, get in 4 Oct. My mom will have power of attourney etc. The proceeds may well not come through until a month or 2 after we have arrived in Oz. Will we get taxed on this or will it still be classed as our migrating capital (for want of a better word).

2. Because my wife is Australian (although has lived here for 12 years), if we have the money transferred into a new joint account in Oz, will she be liable to any tax?

Any help would be much appreciated.

Mark, Kelly & Girls

Re: House Proceeds/Tax taking them into Oz
 

Hello Mark.

So long as you have lived in your house throughout the period of ownership (ie it hasn't been let) you don't have any CGT issues in the UK when you sell it.

If the proprety appreciates in value from the date of your arrival to live in Australia to the date of its eventual disposal you might have a tax liability in Australia though.

Note also that date of unconditional exchange of contracts is usually the key date for capital gains tax purposes.

There's no tax liability arising on the physical transfer of funds though - tax charges generally only arise on the underlying transaction that generates the capital which is being transferred.

In addition, it is worth remembering that if you hold UK£ after you move to Australia and if these funds subsequently appreciate in value you have an exposure to tax in Australia when you convert them to A$'s, or even if you transfer the funds from you to your partner/spouse.

By way of example:

1. You have £100,000 in a UK bank account and move to Australia when the exchange rate is £1 = A$2.6 => you have funds valued at A$260,000.

2. You transfer these funds to Australia 3 months later when the exchange rate is £1 = A$2.8 => A$280,000 is transferred.

As a result of the above you have to include A$20,000 on your Aussie Tax Return in the tax year in which you transfer the funds to Australia.

Does this help?



Alan Collett
alan-at-gomatilda-dot-com
Registered Migration Agent Number 0102534
and a Fellow of the Institute of Chartered Accountants in England and Wales
http://www.gomatilda.com and
http://www.collettandco.co.uk

Re: House Proceeds/Tax taking them into Oz
 

In <[email protected]> Alan Collett wrote:

    > By way of example:
    >
    > 1. You have £100,000 in a UK bank account and move to Australia when the exchange
    > rate is £1 = A$2.6 => you have funds valued at A$260,000.
    >
    >2. You transfer these funds to Australia 3 months later when the
    > exchange rate is £1 = A$2.8 => A$280,000 is transferred.
    >
    > As a result of the above you have to include A$20,000 on your Aussie Tax Return in
    > the tax year in which you transfer the funds to Australia.

Can you claim a loss for tax purposes if the A$ goes the other way ?

Re: House Proceeds/Tax taking them into Oz
 

Yes, but don't expect the loss to be capable of being offset against your income - it will be ring-fenced to be offset against future capital gains.

Best regards.

Re: House Proceeds/Tax taking them into Oz
 

Thank you Alan.

Re: House Proceeds/Tax taking them into Oz
 

Does this CGT still apply if you haven't physically moved house but are travelling around making up your mind on if/where to go?

Could it be avoided by going overseas again before you settle, after activating the initial entry and while waiting for property to go through?

Getting very technical (for me)!

Re: House Proceeds/Tax taking them into Oz
 

Hello Alice.

Yours is one of those "it all depends" questions.

The issue is whether or not you become a tax resident of Australia (and whether or not you have ceased to be a resident of, say, the UK). And I can't answer that without knowing more about your circumstances.

Best regards.

Re: House Proceeds/Tax taking them into Oz
 

Hi Alice,

I think you mean: can you avoid paying UK CGT if you sell your assets as a non UK resident. In general, the answer is yes, provided you stay away from the UK as a non resident for 5 tax years. You may be liable for CGT elsewhere but I believe for Aus you can legally avoid most if not all of your CGT liability on a UK house sale by careful planning. It's quite technical and may be worth getting expert advice. See in particular the various threads from http://www.inlandrevenue.gov.uk/manu...6_cgcont2f.htm in particular http://www.inlandrevenue.gov.uk/manu...24_cg25801.htm
and http://www.inlandrevenue.gov.uk/manu...26_cg25803.htm
and related threads

All the best

Re: House Proceeds/Tax taking them into Oz
 

Thanks. I think this one will take a bit of thought!