spj

Hello

We are in the early stages of the whole move to Oz process and are finding out as much as we can about everything.

One question I have - does anyone currently living in Oz still own and rent out their house back in the UK? We are considering doing this when the time comes, but I have heard about funny tax implications - are there any? If anyone who is doing this could let me know if its easy or not, and what to watch out for I'd much appreciate it.

Thanks alot

Simon

Don

Tax - you are liable for tax in UK and Aus but the double taxation treaty means you will only pay once. If your rental income after expenses is lower than the UK single person's allowance - no tax payable in UK. If you sell your UK residence before you have been tax resident in Aus for at least 5 tax years and you move back to the UK you may be liable for UK CGT.

It's easy enough, esp with an agent but be aware of your reasons for doing it. Eg hoping for capital increase in UK that outweighs any income tax or CGT issues.

teresa.c

Hi Simon

We were thinking about renting our house out for a few years and then selling it at a later date. Found out Oz taxman wants 48% of any capital gains made!!! Our house is now on the market!!!

This may help:

http://britishexpats.com/forum/attac...&postid=846383

Kiwipaul

WRONG WRONG. The tax office will want 24% of any capital gain as if you've owned the property for more than 12 months you get a 50% allowance.

If you make a $100,000 capital gain the tax office will only look at 50% ie $50,000 as being liable for 48% tax.
This is the best way to make money in Australia as the max you are taxed is 24% even if you are on the highest tax rate.

see http://britishexpats.com/forum/showt...t=CGT+kiwipaul

teresa.c

Thanks for that. That other thread made for very interesting reading.
I apologise that I had my information wrong. I will shoot my informers at dawn!!

Seriously, where can I find all this info? I scoured the net and what I found is what you read. Is there anywhere that portrays it just as you have, in laymans terms?!!

I def prefer your version of events rather than mine!!

Thanks again

renth

The bit about the Capital Gains tax was news to me. I told you it was 48%, which is what I thought it was - sorry. So I'm glad that it appears not to be the case.

Even so, after I have paid the tax and the Agent it doesn't leave loads left over, but enough to make a difference.

spj

Thanks all for replying

So, if my rental income is not much more than my mortgage payments (interest only, not capital repayments) plus any agents fees then I won't have to pay much/if any income tax from letting the house out (in UK or Oz). Right?

I read the info from Collett & Co (from link given) which basically said what I have just said. They also mention a 'nasty sting in the tail' where the aussie tax office ask for 10% of any interest payments I make to my UK mortgage company!! Is this true? Does anyone pay this? Can it be recovered somehow?
If I'm going to have to pay that, then it might put us off renting out our house and we might sell up and save ourselves the hassle and money (and capital gains tax!)

Thanks

Simon

Kiwipaul

This is the bit I don't understand as I've an investment property in NZ and the tax office know about it, but the have never asked me for this 10% of interest payments, so I canot help (no intension of bringing it up with them)

teresa.c
You would have to go to the Australian tax site but they speak in double dutch as far as I'm concerned. One thing to bare in mind is you only get this 50% allowance so long as you've owned the property for more than 12 months. This applies to all capital gains.

teresa.c

I dont understand the Oz tax site either! Ive just got an email address for an acountant in Oz so Ive sent him a line. Looks like we will probably just sell now anyway! But I will keep you posted as to what he says.

Kiwipaul

I've found this on the ATO site

Quote
What is the CGT discount?
You may be eligible for a CGT discount if:

you are an individual, a trust or a complying superannuation fund
a CGT event happens in relation to an asset that you own
the CGT event happens after 11.45 am on 21 September 1999
you acquired the asset at least 12 months before the CGT event, and
you (or others) have not chosen to use the indexation method.
If all of the above apply, you can reduce the capital gain that you have made (after subtracting any capital losses) by the discount percentage that applies to you. The discount percentage for individuals and trusts is 50%, while the percentage for complying superannuation funds is 33 1/3%.



link to ATO

Alan Collett

The requirement to remit the 10% tax is out on the fringes of the tax legislation and sits outside the general income tax charge, but it is there nonetheless.

In other words it is a tax liability that is outside the income tax that you pay by completing your annual Aussie tax return.

Note also that if you don't pay the 10% tax you are not permitted under the tax legislation to claim the interest paid to the lender as a deduction against your rental income.

Best regards.

Alan Collett

Actually Don, UK CGT would be payable if you sell an investment property that is owned at the date of departure after you leave the UK if you return to the UK within five complete tax years of ceasing to be tax resident in the UK.

In other words its not a matter of having been resident in Australia for at least 5 tax years, it is more a requirement to not return to the UK for at least 5 complete tax years.

Example:

1. You depart UK 01/09/2003 owning property which you let out.
2. You sell the property on 01/09/2005.
3. You may well have an exposure to UK CGT if you return to live there before 05/04/2009.

Note also:
1. Aussie CGT might be an issue (see other postings on this thread).
2. In the above example there might not be a liability to UK CGT because of deemed periods of ownership and the valuable letting exemption.
3. Complete form NRL1 before you depart the UK so that your rentals can be paid to you on a gross basis (ie with no tax dducted): http://www.inlandrevenue.gov.uk/cnr/nrl1_bw.pdf

=> Take advice if you are planning to let a UK property.

Hope this helps.

mikeburt

surely the CGT is only payable on the profit you make from the sale,not the initial capital you invested and don't they also take into account the value that the money you invested would have increased+isn't there a threshold allowance here?We are just selling our house and buying a smaller one to rent out,so I cannot see the CGT being an issue or have some of you lucky people made an absolute fortune on your properties!If thats the case,do what we are and avoid the CGT altogether(hopefully-mind you I'd better check with the accountant).

Don

Apologies for my crap English but that's what I meant to say and understood too!

Alan Collett

Mike,

Which country are you referring to here - the UK or Australia?

In Australia (unlike the UK):
- there is no allowance for indexation any more
- there is no annual exemption for capital gains
- a discount of 50% applies to the gain so long as you have owned the asset for more than 12 months after your arrival in Australia

If you are an Aussie tax resident, have an investment property in the UK that appreciates in value and you sell it when you are living in Australia you are subject to Australian tax ...

Best regards.