Quality of financial advice available- is it difficult to emigrate later on in life
Feb 17th 2012, 9:05 pm
#1
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Thread Starter
Joined: Aug 2011
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Discussion on exchange rates and implications of Permanent Residency
I have been considering going PR for some time ( I'm on 457 ) whereby you are NOT taxed on worldwide income so if you rent your UK home out you are not taxed on income. Of course, the exchange rate being what it is, I don't transfer monies across. WhenI arrived the exchange rate was 2.5.
I just received a report from a chartered accountant about the changes to taxation if I become PR. I am not wealthy, approaching retirement and with little in way of pension now. I dont have the report in front of me as I write this . it was depressing reading. doom and gloom all the way. Capital gains tax everywhere. I read an article somewhere that the downside to emigrating to OZ was the punitive tax measure for expats. My experience is that financiers here try to encourage you sell UK assets so that you can buy Aussie assets. This is ok, I think, if you are starting out in life or are dead cert you want to spend the rest of your life here. But what if most of your life is in UK, you move your assets here at a diabolical exchange rate, the exchange rate improves in 10 years time, goes back to 2.5, then you have to transfer your assets back to UK so that you can retire in UK. When I asked about healthcare in retirement , the accountant said that people pay for healthcare insurance out of their savings ( extremely long waiting lists in public sector and reports of poorly
trained doctors and lack of care consistency) Surely, in retirement, healthcare provision is number one priority so really why would an accountant encourage me to transfer my UK assets here??!!. I am not a financial person ( although. I do heaps of research ) so,is there something that I'm not getting????? There a threads about people coming here to retire.
Can I maintain a decent standard of living here whilst leaving assets in Uk or are the tax implications too punitive? Perhaps they arent that punitive but I'm being misinformed as a strategy to encourage me to transfer assets here . Who knows?
I would be very interested in hearing from members who have faced this dilemma during the exchange rate ' lean' years and or when cost of living in Australia is high and housing prices reportedly highly inflated so few incentives to buy. What advice have you been given? Did you keep hold of UK assets just in case you wanted to retire in Uk? Is there an age whereby unless you are wealthy, you can't afford to emigrate here? Did you keep UK assets then down the line, regret the decision?
I just received a report from a chartered accountant about the changes to taxation if I become PR. I am not wealthy, approaching retirement and with little in way of pension now. I dont have the report in front of me as I write this . it was depressing reading. doom and gloom all the way. Capital gains tax everywhere. I read an article somewhere that the downside to emigrating to OZ was the punitive tax measure for expats. My experience is that financiers here try to encourage you sell UK assets so that you can buy Aussie assets. This is ok, I think, if you are starting out in life or are dead cert you want to spend the rest of your life here. But what if most of your life is in UK, you move your assets here at a diabolical exchange rate, the exchange rate improves in 10 years time, goes back to 2.5, then you have to transfer your assets back to UK so that you can retire in UK. When I asked about healthcare in retirement , the accountant said that people pay for healthcare insurance out of their savings ( extremely long waiting lists in public sector and reports of poorly
trained doctors and lack of care consistency) Surely, in retirement, healthcare provision is number one priority so really why would an accountant encourage me to transfer my UK assets here??!!. I am not a financial person ( although. I do heaps of research ) so,is there something that I'm not getting????? There a threads about people coming here to retire.
Can I maintain a decent standard of living here whilst leaving assets in Uk or are the tax implications too punitive? Perhaps they arent that punitive but I'm being misinformed as a strategy to encourage me to transfer assets here . Who knows?
I would be very interested in hearing from members who have faced this dilemma during the exchange rate ' lean' years and or when cost of living in Australia is high and housing prices reportedly highly inflated so few incentives to buy. What advice have you been given? Did you keep hold of UK assets just in case you wanted to retire in Uk? Is there an age whereby unless you are wealthy, you can't afford to emigrate here? Did you keep UK assets then down the line, regret the decision?
Feb 17th 2012, 9:56 pm
#2
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Re: Discussion on exchange rates and implications of Permanent Residency
I don't really get your tax on worldwide income issue. Don't you pay tax on income wherever it is? i.e. you would either pay it here or in UK but never both?
What capital gains tax are you thinking you might need to pay?
We moved 18 months ago when it was not a good time to either sell up or transfer capital. So we left everything in the UK, yes I pay tax on rental income, so be it, tax is a fact of life and if you have income then it is usually taxed and I don't see why that is punitive.
I understand the dilemma about moving everything over now at a rubbish rate but then finding you want to go back to the Uk at some point and by then the rate is back up. It is partly why we did not move funds over too, however we are not approaching retirement (38 and 41) and so we are just starting again here.
I feel a little troubled by the tone of your email. You have sought financial advice but it seems to have left you even more confused which is not a sign of quality financial advice. Somebody does seem to be wanting to scare you into doing something that you don't want to do. I cannot recommend anyone, but can I suggest you take a second opinion and find another advisor to talk things through with you.
Good luck.
What capital gains tax are you thinking you might need to pay?
We moved 18 months ago when it was not a good time to either sell up or transfer capital. So we left everything in the UK, yes I pay tax on rental income, so be it, tax is a fact of life and if you have income then it is usually taxed and I don't see why that is punitive.
I understand the dilemma about moving everything over now at a rubbish rate but then finding you want to go back to the Uk at some point and by then the rate is back up. It is partly why we did not move funds over too, however we are not approaching retirement (38 and 41) and so we are just starting again here.
I feel a little troubled by the tone of your email. You have sought financial advice but it seems to have left you even more confused which is not a sign of quality financial advice. Somebody does seem to be wanting to scare you into doing something that you don't want to do. I cannot recommend anyone, but can I suggest you take a second opinion and find another advisor to talk things through with you.
Good luck.
Feb 18th 2012, 1:00 am
#3
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Joined: Jan 2003
Location: Brisbane
Posts: 1,576
Re: Discussion on exchange rates and implications of Permanent Residency
I've retired and still have assets in UK and NZ and by knowing the tax rules I avoid paying tax in the UK (Keep capital gains below 10,000 pounds and income below 7,000) and no UK tax liability.
You have to declare this in Oz and pay tax on it but their are ways to legally minimise this tax in Oz.
Put $50,000 into sup and only pay tax on it of 15% (providing you are over 55). You just need to research the tax situation in the different countries.
Feb 18th 2012, 1:37 am
#4
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Re: Discussion on exchange rates and implications of Permanent Residency
Both very helpful - thank you. I'll certainly take on board your comments.
Feb 18th 2012, 2:17 pm
#5
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Re: Discussion on exchange rates and implications of Permanent Residency
Why don't you consider investing in UK property, and gearing up to finance the purchase?
* You can negatively gear a UK property when you are a tax resident of Australia and hold a permanent residency visa.
* Any capital gain arising on disposal can be discounted by one-half.
* A UK£ denominated borrowing that is taken out to finance the investment and that increases in amount in A$ terms between the date it is taken out and the date it is redeemed should generate a forex loss which you can offset against your assessable income. It is also a hedge against the currency moving against you.
As an example:
- Property in the UK is acquired in March 2012 for £200,000
- Acquired by way of £80,000 of personal monies and £120,000 of local (ie UK£) borrowing on an interest only basis
- Exchange rate at time of purchase: A$1 = £0.6667, or £1 = A$1.50
- Cost base of property for CGT purposes: A$300,000
- A$ equivalent of local borrowing: A$180,000
- Property sold in June 2013 for the same amount as purchase price, ie £200,000
- Exchange rate at time of sale: A$1 = £0.50, or £1 = A$2.00
- Sale proceeds are therefore A$400,000
- Local borrowing of £120,000 redeemed on sale, now equivalent to A$240,000
- Capital gain is A$100,000, which is discounted (as property has been owned for more than 12 months) to give a discounted gain of A$50,000
- The foreign currency loss on the local borrowing is A$60,000. This is not discounted.
=> Overall result: net cash of A$100,000, with a balance of the forex loss equal to A$10,000 available to offset
Maybe run this past your accountant - or send me a PM or email (click on my name to the left of this post).
Best regards.
* You can negatively gear a UK property when you are a tax resident of Australia and hold a permanent residency visa.
* Any capital gain arising on disposal can be discounted by one-half.
* A UK£ denominated borrowing that is taken out to finance the investment and that increases in amount in A$ terms between the date it is taken out and the date it is redeemed should generate a forex loss which you can offset against your assessable income. It is also a hedge against the currency moving against you.
As an example:
- Property in the UK is acquired in March 2012 for £200,000
- Acquired by way of £80,000 of personal monies and £120,000 of local (ie UK£) borrowing on an interest only basis
- Exchange rate at time of purchase: A$1 = £0.6667, or £1 = A$1.50
- Cost base of property for CGT purposes: A$300,000
- A$ equivalent of local borrowing: A$180,000
- Property sold in June 2013 for the same amount as purchase price, ie £200,000
- Exchange rate at time of sale: A$1 = £0.50, or £1 = A$2.00
- Sale proceeds are therefore A$400,000
- Local borrowing of £120,000 redeemed on sale, now equivalent to A$240,000
- Capital gain is A$100,000, which is discounted (as property has been owned for more than 12 months) to give a discounted gain of A$50,000
- The foreign currency loss on the local borrowing is A$60,000. This is not discounted.
=> Overall result: net cash of A$100,000, with a balance of the forex loss equal to A$10,000 available to offset
Maybe run this past your accountant - or send me a PM or email (click on my name to the left of this post).
Best regards.
Feb 18th 2012, 2:38 pm
#6
Planning for the future
Joined: Dec 2011
Location: Soon to be Brisbane :D
Posts: 231
Re: Discussion on exchange rates and implications of Permanent Residency
I have been considering going PR for some time ( I'm on 457 ) whereby you are NOT taxed on worldwide income so if you rent your UK home out you are not taxed on income. Of course, the exchange rate being what it is, I don't transfer monies across. WhenI arrived the exchange rate was 2.5.
I just received a report from a chartered accountant about the changes to taxation if I become PR. I am not wealthy, approaching retirement and with little in way of pension now. I dont have the report in front of me as I write this . it was depressing reading. doom and gloom all the way. Capital gains tax everywhere. I read an article somewhere that the downside to emigrating to OZ was the punitive tax measure for expats. My experience is that financiers here try to encourage you sell UK assets so that you can buy Aussie assets. This is ok, I think, if you are starting out in life or are dead cert you want to spend the rest of your life here. But what if most of your life is in UK, you move your assets here at a diabolical exchange rate, the exchange rate improves in 10 years time, goes back to 2.5, then you have to transfer your assets back to UK so that you can retire in UK. When I asked about healthcare in retirement , the accountant said that people pay for healthcare insurance out of their savings ( extremely long waiting lists in public sector and reports of poorly
trained doctors and lack of care consistency) Surely, in retirement, healthcare provision is number one priority so really why would an accountant encourage me to transfer my UK assets here??!!. I am not a financial person ( although. I do heaps of research ) so,is there something that I'm not getting????? There a threads about people coming here to retire.
Can I maintain a decent standard of living here whilst leaving assets in Uk or are the tax implications too punitive? Perhaps they arent that punitive but I'm being misinformed as a strategy to encourage me to transfer assets here . Who knows?
I would be very interested in hearing from members who have faced this dilemma during the exchange rate ' lean' years and or when cost of living in Australia is high and housing prices reportedly highly inflated so few incentives to buy. What advice have you been given? Did you keep hold of UK assets just in case you wanted to retire in Uk? Is there an age whereby unless you are wealthy, you can't afford to emigrate here? Did you keep UK assets then down the line, regret the decision?
I just received a report from a chartered accountant about the changes to taxation if I become PR. I am not wealthy, approaching retirement and with little in way of pension now. I dont have the report in front of me as I write this . it was depressing reading. doom and gloom all the way. Capital gains tax everywhere. I read an article somewhere that the downside to emigrating to OZ was the punitive tax measure for expats. My experience is that financiers here try to encourage you sell UK assets so that you can buy Aussie assets. This is ok, I think, if you are starting out in life or are dead cert you want to spend the rest of your life here. But what if most of your life is in UK, you move your assets here at a diabolical exchange rate, the exchange rate improves in 10 years time, goes back to 2.5, then you have to transfer your assets back to UK so that you can retire in UK. When I asked about healthcare in retirement , the accountant said that people pay for healthcare insurance out of their savings ( extremely long waiting lists in public sector and reports of poorly
trained doctors and lack of care consistency) Surely, in retirement, healthcare provision is number one priority so really why would an accountant encourage me to transfer my UK assets here??!!. I am not a financial person ( although. I do heaps of research ) so,is there something that I'm not getting????? There a threads about people coming here to retire.
Can I maintain a decent standard of living here whilst leaving assets in Uk or are the tax implications too punitive? Perhaps they arent that punitive but I'm being misinformed as a strategy to encourage me to transfer assets here . Who knows?
I would be very interested in hearing from members who have faced this dilemma during the exchange rate ' lean' years and or when cost of living in Australia is high and housing prices reportedly highly inflated so few incentives to buy. What advice have you been given? Did you keep hold of UK assets just in case you wanted to retire in Uk? Is there an age whereby unless you are wealthy, you can't afford to emigrate here? Did you keep UK assets then down the line, regret the decision?
Thanks
Feb 18th 2012, 3:22 pm
#7
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Location: Offices in Melbourne, Brisbane, Perth, Geelong (Australia), and Southampton (UK)
Posts: 6,459
Re: Discussion on exchange rates and implications of Permanent Residency
I think hobbis didn't put his brackets in the right place ... I think it should read:
(I'm on 457 whereby you are NOT taxed on worldwide income so if you rent your UK home out you are not taxed on income)
Best regards.
(I'm on 457 whereby you are NOT taxed on worldwide income so if you rent your UK home out you are not taxed on income)
Best regards.
Feb 18th 2012, 3:29 pm
#8
Planning for the future
Joined: Dec 2011
Location: Soon to be Brisbane :D
Posts: 231
Re: Discussion on exchange rates and implications of Permanent Residency
sorry for sounding dumb, but if i'm on a 457 therefore not paying tax on rent for UK home in Aus, however do I still pay tax in UK for profits on income on rent or because I am temp living elsewhere in the world I don't pay anything?
Feb 18th 2012, 4:21 pm
#9
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Location: Offices in Melbourne, Brisbane, Perth, Geelong (Australia), and Southampton (UK)
Posts: 6,459
Re: Discussion on exchange rates and implications of Permanent Residency
Hi Emma.
Consider the UK and Australia separately.
In the UK: you remain entitled to a UK personal allowance if you are a UK citizen, whether or not you are a resident.
This means that for any UK tax year if you have no other UK income other than rental income you will not pay any UK tax if the rental income (after deducting allowable expenses, such as mortgage interest, letting agent fees, etc) is less than the UK personal allowance.
In Australia: on a subclass 457 visa you are not subject to Aus tax on UK source rental income.
=> Overall, you may not pay tax anywhere on your rental income if you are living and working in Australia as the holder of a subclass 457 visa.
Hope this helps.
Consider the UK and Australia separately.
In the UK: you remain entitled to a UK personal allowance if you are a UK citizen, whether or not you are a resident.
This means that for any UK tax year if you have no other UK income other than rental income you will not pay any UK tax if the rental income (after deducting allowable expenses, such as mortgage interest, letting agent fees, etc) is less than the UK personal allowance.
In Australia: on a subclass 457 visa you are not subject to Aus tax on UK source rental income.
=> Overall, you may not pay tax anywhere on your rental income if you are living and working in Australia as the holder of a subclass 457 visa.
Hope this helps.
Feb 18th 2012, 4:23 pm
#10
Migration Agent
Joined: May 2002
Location: Offices in Melbourne, Brisbane, Perth, Geelong (Australia), and Southampton (UK)
Posts: 6,459
Re: Discussion on exchange rates and implications of Permanent Residency
PS. Maybe request the Moving Overseas and Letting factsheet here:
http://www.gmtax.com.au/tax-factsheets/
http://www.gmtax.com.au/tax-factsheets/
Feb 19th 2012, 7:05 pm
#11
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Joined: Aug 2011
Posts: 56
Re: Discussion on exchange rates and implications of Permanent Residency
You are quite right about the brackets Alan and the post should read 'not taxed on rental income here in Australia 'but of course subject to UK tax. Thanks for helpful advice.
Feb 23rd 2012, 6:48 pm
#12
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Joined: Aug 2011
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Quality of financial advice available- is it difficult to emigrate later on in life
I am considering going PR ( I'm on 457 ) . Of course, the exchange rate being what it is, I don't transfer monies across. WhenI arrived the exchange rate was 2.5.
I just received a report from a chartered accountant about the changes to taxation if I become PR. I am not wealthy, approaching retirement and with little in way of pension now. I don't have the report in front of me as I write this.I read an article somewhere that the downside to emigrating to OZ are the punitive tax measure for expats. My experience is that financiers here try to encourage you sell UK assets so that you can buy Aussie assets. This is ok, I think, if you are starting out in life or are dead cert you want to spend the rest of your life here. But what if most of your life is in UK, you move your assets here at a diabolical exchange rate, the exchange rate improves in 10 years time, goes back to 2.5, then you have to transfer your assets back to UK so that you can retire in UK. When I asked about healthcare in retirement , the accountant said that people pay for healthcare insurance out of their savings ( extremely long waiting lists in public sector and reports of poorly
trained doctors and lack of care consistency) Surely, in retirement, healthcare provision is number one priority so really why would an accountant encourage me to transfer my UK assets here??!!. I am not a financial person ( although. I do heaps of research ) so,is there something that I'm not getting????? There a threads about people coming here to retire.
Can I maintain a decent standard of living here whilst leaving assets in Uk or are the tax implications too punitive? Perhaps they arent that punitive but I'm being misinformed as a strategy to encourage me to transfer assets here . Who knows?
I would be very interested in hearing from members who have faced this dilemma during the exchange rate ' lean' years and or when cost of living in Australia is high and housing prices reportedly highly inflated so few incentives to buy. What advice have you been given? Did you keep hold of UK assets just in case you wanted to retire in Uk? Is there an age whereby unless you are wealthy, you can't afford to emigrate here? Did you keep UK assets then down the line, regret the decision?
I just received a report from a chartered accountant about the changes to taxation if I become PR. I am not wealthy, approaching retirement and with little in way of pension now. I don't have the report in front of me as I write this.I read an article somewhere that the downside to emigrating to OZ are the punitive tax measure for expats. My experience is that financiers here try to encourage you sell UK assets so that you can buy Aussie assets. This is ok, I think, if you are starting out in life or are dead cert you want to spend the rest of your life here. But what if most of your life is in UK, you move your assets here at a diabolical exchange rate, the exchange rate improves in 10 years time, goes back to 2.5, then you have to transfer your assets back to UK so that you can retire in UK. When I asked about healthcare in retirement , the accountant said that people pay for healthcare insurance out of their savings ( extremely long waiting lists in public sector and reports of poorly
trained doctors and lack of care consistency) Surely, in retirement, healthcare provision is number one priority so really why would an accountant encourage me to transfer my UK assets here??!!. I am not a financial person ( although. I do heaps of research ) so,is there something that I'm not getting????? There a threads about people coming here to retire.
Can I maintain a decent standard of living here whilst leaving assets in Uk or are the tax implications too punitive? Perhaps they arent that punitive but I'm being misinformed as a strategy to encourage me to transfer assets here . Who knows?
I would be very interested in hearing from members who have faced this dilemma during the exchange rate ' lean' years and or when cost of living in Australia is high and housing prices reportedly highly inflated so few incentives to buy. What advice have you been given? Did you keep hold of UK assets just in case you wanted to retire in Uk? Is there an age whereby unless you are wealthy, you can't afford to emigrate here? Did you keep UK assets then down the line, regret the decision?
Feb 23rd 2012, 7:09 pm
#13
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Re: Quality of financial advice available- is it difficult to emigrate later on in li
Feb 23rd 2012, 7:13 pm
#14
Lost in BE Cyberspace
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Re: Quality of financial advice available- is it difficult to emigrate later on in li
You posted this (similar) last week.
Feb 23rd 2012, 7:59 pm
#15
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Joined: Aug 2011
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Re: Quality of financial advice available- is it difficult to emigrate later on in li
Correct , consulted with a friend, and changed the title to reflect more accurately the type of discussion I'm trying to generate. Replies so far have been helpful.