Still Game

Hi

We're planning on making the move next year. We will be trying to sell the flat we have in the UK, however, as we're not 100% sure we will be setting in Australia for ever, we want to be careful with the equity we release from our (hopeful!) sale of our flat.

We were thinking of selling up, and putting the money into an ISA each and the remainder into a high interest account - ie: leaving it in the UK until we decide what it is we want to to. It wont' be a lot of money we're taking about here but we want to try and be smart with it - bad track record with savings etc..!

After about 2 years in Australia, we will know whether we want to buy a house there or move back to the UK to purchase a house. We don't want to move the money from AUS to UK and back again possibly losing out with exchange rates/any taxes etc..

We will try to speak to a financial planner closer to the time, however, thought I would ask, has anyone taken the route of leaving the money in the UK and if so, in their opinion how this best works for you?

I have heard we will need to pay tax on the interest in the UK, even though we wouldn't be livign there - is this correct?

Or, would it be best to move everyone over to a high interest account in Australia?

Advice and opinions welcome

Thanks
OSV

jan

Hello, You are still entitled to your personal allowances in the u.k. before paying tax.
Your idea makes sense and with a little bit of luck the exchange rate may improve somewhat over time. However no one can second guess the best time to exchange currency it is just a case of getting a rate you are happy with at that moment in time and bite the bullet!
Unless you have heaps of money to deal with a financial adviser can be a waste of funds for small amounts it is easy enough to find investment vehicles.Finacial advisers dont have crystal balls either they just research and keep up to date with legislation. I have always been a little wary of so called Financial advisers as Unless you are paying them a direct fee for information they are compromised and try and sell a policy,fund,investment that is most beneficial to themselves.
Good luck whatever you decide.

Still Game

Thanks Jan. I wasn't sure if you weren't resident in the UK if you were still entitled to the personal allowance?

JAJ

Leaving money in the UK is fine if you are planning to come back.

If you end up staying in Australia, it's just foreign exchange speculation on which you may either win or lose.

What kind of visa are you going to Australia on - temporary or permanent?
That influences the tax treatment.

And if you are genuinely unsure, have you thought about splitting it 50/50 between the UK and Australia?

Or if you think you'll return to the UK, have you considered keeping your flat?

Still Game

Thanks JAJ for your reply, you ask some very good questions.

Re visa, unsure. It will be a spouse visa, that was another question actually - I'm unsure what visa (if there are different type of spousal visas?) to apply for, temporary - how long does this allow you both to remain in the country? Permanant, does that mean you have absolutely no intention of returning? Do you need to specify this when applying?

I am Australian, my partner is Scottish - we aren't 100% sure we will be moving to Australia for ever - we feel it's best to try it for 2 or so years and then decide where we wish to be. No point putting all eggs into one basket when we really don't know how we will feel after 2 years.

We don't wish to keep the flat as we've had a few issues with the upstairs neighbour flooding us a few times - all ok now touch wood! However, she was difficult enough to get hold of whilst we are living here below her - so feel that it would be unfair to have tentants in and then if something went wrong trying to sort from another country just isn't an option.

If we hadn't decided to move to Australia for 2 years, then we would have moved anyway to a semi or detached if able to afford (probably not but you can dream!).

JAJ

When you apply for the spouse visa, you apply for both permanent and temporary spouse visa at the same time. You get the permanent visa straight away if you've been together 3 or more years when you apply (2 years if you have at least one child together).

You always have to intend to live in Australia, but you don't have to promise to do so for the rest of your life.


Three issues to bear in mind:

1. Have you got your British citizenship (if not, you will have problems returning), and

2. Any interest income or rental will be taxable in Australia (once you move). If you have UK tax due, you can claim a credit.

3. You should understand that once you move to Australia, any capital gains you have (measured from the Australian dollar value when you settle) will be taxable either when you sell or when you leave Australia again.

What this means is that if you sell your flat before you leave, and leave funds in the UK, you may be subject to capital gains tax if the Australian dollar amount increases after you move. Or a capital loss if it goes down.

If you keep your flat then you could also be subject to Australian capital gains if the value increases after you move. Also, unless you leave the UK for 5 years or more, there may still be UK capital gains tax issues to consider, although there is a main residence exemption.

Bottom line is that since about 2006, the capital gains tax laws aren't all that helpful to Australian citizens overseas who want to move back into Australia for a short period of time. That doesn't mean you shouldn't do so, however.

Still Game

Fabulous response, huge thanks for the information. I didn't realise we would be applying for both visa's at the same time. The intention is to live back in Australia; however, as I have lived away for so long, and my partner is also a wee bit unsure, we felt it was best just to stay for 2 years initially, then to see what happens/how we feel after that.

I will definitely read more and try to understand the tax issues on capital gains. Being honest, I have no idea at all how this works, so thanks for putting me in the right direction.

I have a British Passport (have been in Scotland for 9 years). I have been with my partner (fiancé) for nearly 8 years so hopefully it should be a smooth process to apply for the visa. I don't have British citizenship, so it shouldn't be an issue returning if I still have a valid British passport? Please correct me if I'm wrong here!

We won't have any income from the UK when we move. Aside from interest that we wish to put into ISA's and high interest account (thus the question I raised initially in first post). Would we pay interest on the interest we earn from the account in the UK so to speak? That's where I am confused. Would we declare this on our Aussie taxation forms? IF not, how would Australia know we had this account in the UK?

We would not be looking to purchase a house in Australia -until after the 2 years were up and only if we decided to stay obviously. If we did decide to stay longer and purchased property, are you saying we would pay tax on gains on that also if we sold and made interest?

I really need to sit down (quietly!) and try to understand this.... we're both not financial at all - can budget obviously, but know nothing about taxation laws unfortunately. Thanks again for your fantastic advice

JAJ

Before getting too concerned, you should understand that you need to make gains before you can be taxed on them ...

Unless someone made a huge mistake, you have to be a British citizen to have a (British citizen) passport. Look at the ID page of your British passport, what does it say for Nationality Status?

How did you get your British passport - do you have a British born parent?


You'll have to declare your worldwide income for Australian tax purposes, so you will pay tax on any interest, from the ISA or otherwise.

If you don't, the ATO can still find out through a variety of ways, such as information exchange with the UK tax authorities.

Still Game

Oh goodness I'm embarrassed, you are 100% correct, I've never looked!! - I thought you had to actually apply (separately) for citizenship even though you had a passport. When I applied for my Brit pp in Australia back in 1999 I phoned the passport office and spoke with a lady who advised me that was the case!! Anyway, I never did anything about it as I really had no idea how long I was planning on being in the UK.... 9 years later ! ;-)

Yes, my father is from N.I - thus I have a Brit PP.

I didn't realise that you had to declare your worldwide income for A T purposes - I will be doing this of course - always stay on the right side of a law if I can help it!

So, if we make money on the flat sale here, and it's put into ISA's and h.i accounts, then we need to ascertain the amount of 'gain' from the accounts and declare this on our Australia taxation form - that's what I'm understanding. However, would we have to pay tax on the money we gained from the flat sale also? That's where I'm confused. Surely the money we made on the flat wouldn't have to be declared in Australia but any interest we earnt in the accounts listed above we would. I know, I get tangled up in all this sometimes!

Bermudashorts

If you are not sure about a permanent move yet then I would probably leave money in UK until you are sure. Just bring over what you need when you need it in the meantime. Once you have decided (if you decide) to make it a permanent thing then reassess the situation then.

JAJ

If you're not automatically a citizen (you are, if your father was born in NI and married to your mother) then you need to apply for citizenship before you can have a passport.

It never works the other way where you get a passport and then apply for citizenship, except for those cases where mistakes are made and people are given passports incorrectly (bad situation).

As you're a British citizen "by descent" then was your partner born in the United Kingdom? If by some chance he was born elsewhere then you may have to go through some additional hoops to get British citizenship for future children born in Australia.

It's like in the UK - most people living in the UK have to declare their worldwide income to the HMRC. Whether that income is brought into the UK or not. There are one or two exceptions to this rule, but not many.

Assuming you sell the flat before you move, it's not subject to Australian capital gains tax. It won't be subject to UK capital gains either as it was your main residence (also assuming you have a capital gain to begin with).

If you then leave the money in the UK, any interest you earn will be taxable in Australia. You might also have a capital gain on this money if the Australian dollar value of it increases after you move (or a capital loss if it goes down in value). If you bring the money to Australia when you move you avoid all tax complications (you'll just pay tax on any interest in Australia) BUT if you later on go back to the UK and re-exchange into British pounds, it could be worth more - or less.

Still Game

Yes, he was born in Scotland.


OK - I've never had any assets/income from any other source whilst living in the UK, thus never realised this was the case.

Makes sense to me now, you only pay capital gains if it's not your main residence. Our flat is. Hopefully we will 'gain' on it tho - won't be by huge tho unfortuantely!

Ok - so I guess I need to figure out if changing it into AU and sitting in an account over there would be better for any growth, as opposed to leaving it here and paying tax anyway - which is the lesser of two evils I guess!

Bermuda you're right tho, no point moving it all about if we're not sure..... perhaps I should stuff it into a mattress!

THank you so much for your brilliant and valuable advice. It seems today has indeed been a school day for me!

itxrd

Yeah was going to say the same thing. Exchange rate might get get better in meantime