Oz Rascal

Hi Guys,

I'm hoping one of you may be able to help out with some advice on this one...

We have two properties in the UK, our main residence and an apartment that we rent out. We plan to sell our main house before we go to Oz but we are unsure what the best course of action is regarding the apartment.

If we sell it we will have to pay a hefty redemption fee on the mortgage but are trying to find out if this would be a better thing to do than keep it and sell a few years down the line.

The question is does anyone know what the tax implications are of selling a UK property once you're in living in Oz?

We will be getting some tax advice but wondered if anyone had already gone through this - can't imagine we're the first. Any good recommendations on where to get some good tax advice would also be greatly appreciated.

Cheers in advance.

Oz Rascal

Grayling

As far as I knowYou will be liable for capital gains tax if you also own a house in Australia.

You will also need to consider that you will be liable for Australian tax on any rental income from a house you keep in the UK.

G

NedKelly

You will be liable for capital gains tax in Australia when you sell the apartment based on it's increase in value when you became resident here. But there are get outs e.g.if you are only a temporary resident. You will be liable for UK CGT only if you go back within 5 years (unless the twat with the fluffy dyed eyebrows changes the rules)

MartinLuther

As it's not your own home then you are liable for (UK) CGT if you sell it while you're in the UK, or within the (UK) tax year you left or if you return to the UK (to live) within 5 years of leaving (as Ned said).

Again as it's not your own home you are liable for CGT in Aus, but will be liable for the increase between the time that you arrive and the time you sell it. It is worth getting a valuation when you leave (obviously one that's a little generous).

If you rent it out then you will be liable for tax on any rental profits (i.e. rent minus expenses) to both the UK and Aus (although you won't pay twice - you pay UK first and then pay Aus the difference). If you make rental losses these can only be offset against rental profits on your UK property. You cannot offset UK rental losses against Aus profits (or Aus income).

ALFO68

Hi all.

Two years in Australia and counting, have to sit the citizenship test now though!

Hijacking this thread a little as my question is similar:

My wife and I have an apartment in London and we rent it out. One of the notes on the AU tax form is about claiming foreign debt interest as an expense against 'passive income' - it needs to be as part of a 'permanent establishment.'

Question: Can I offset Mortgage interest against the rental income on my AU tax form - my mortgage and expenses actually result in no income.

Alfo68

JAJ

As far as I understand - no problem normally in offsetting interest against rental income. The problems usually arise if you want to offset a passive loss against your employment income.

Oz Rascal

Thanks for the replies.

The CGT is the area where I get a bit confused. I plan on selling my main residence in the UK before I sell the apartment so I am assuming the apartment would then become my "Main Residence".

Where I get confused is could this still be classed as my main residence if I'm living in Oz on a PR visa - we will be renting in Oz until we sell the apartment so I wouldn't own another property. If it's my main UK residence I assume I wouldn't pay UK CGT but I think I would be liable to Australian CGT - is this correct?

Thanks again.

Oz Rascal

NedKelly

Not if someone else lives in it and you are living somewhere else which is your main residence. I think you need to go and see an accountant and get things clear otherwise you will have a UK tax man and an Australian tax man beating a path to your door.

MartinLuther

You'd have to satisfy the UK (and possibly Aus) taxman that you actually set up home in the appartment. Even then there's still the potential for a UK-CGT hit for some of the time it was rented.

Oz Rascal

Thanks for all your great advice guys.

I've enquired with some tax advisors - will chase them up for a reply.

Really appreciate your time. Thanks again.

Oz Rascal

Speargun

hey Oz rascal - was it any advisers in particular? Im going to have a similar query- albeit I only have the one main residence in the UK and we will be renting it out while we rent out in Oz - main problem being weve only lived here in this ouse in UK less than a year - we bought it as a wreck and have totally renovated it - hence the value what we paid for it and what its worth now is much more!

Oz Rascal

Speargum,

I haven't had a reply yet, it was Price Waterhouse Coopers.

I would've thought your main residence would be OK - if you sell before you go, you won't pay any CGT - I think based on my situation you may actually be required to pay CGT if you sell once you're over there - if you're ona PR visa.

If I get a response, I'll let you know.

Good Luck!

Colin

Speargun

thanks for the reply - thing is we arent going to sell till at least a couple of years down the line - although I appreciate your situation is slightly different!
we need to rent out there and then keep our house in the UK due to an excessive redemption fee on our mortgage - from what ive heard so far (we are PR) if we dont buy out there and keep the UK house (renting it in the meantime) we will have to pay Oz tax on the rental income received

NedKelly

Many mortgage companies will not allow you to rent out and if you do they often want a higher interest rate.