Olibeneli

General question here on tax on sale of house proceeds/profit :

I am sitting on circa £200,000 of equity in my house and profit over what I paid for it of about £150,000.

If I leave for Oz and rent this UK house out and also rent in Oz,
is there any tax implications here ?.............My visa is through my wife as skilled independent and I guess we would be tax resident in Oz from the day we land........

So, one year later after hopefully liking Oz and settling there, we sell our UK house with the plan to buy in Oz. Therefore, bringing this gain in to Oz - does it attract CGT ?

Being an accountant I don't expect anyone to give me 100% professional advice, but a bit of a steer would help be search the internet and government web sites to make some sense of it myself............

Surely plenty of people emigrate while leaving a house back in the UK as a safety net.........then if it all turns up rosy they sell up the UK house........

Is it all a question of tax domicle and exactly where you call your main residence.........I'd like to give Oz a year try out and if it all turns up bad, return to the UK to my house, OR, if it's good in Oz sell up but I want to know now what the tax issues here are.

Anyone been through this yet?

DagBoy

I am not a tax expert by any means, but I believe it works something like this.

You move here and become a resident for tax purposes (ATO definition - not necessarily a resident as far as DIMIA are concerned). From that point you are an Aussie tax payer.

On the day you become an Aussie tax resident, you technically acquire your assets - so get a valuation on your house at that time. Say it is worth 200,000 GBP. You live here for a year or so and decide to sell it. That is a CGT event. If you sell it for 200,000 you have made no gain. If you sell it for 190,000 you have made a 10k loss. If you sell for 210,000 you have made a 10k gain. That is the amount on which you will be liable for CGT, though you can also knock off the costs incurred in the CGT event (estate agent fee, solicitor etc.) I am not sure, but I think you can also knock off other costs (insurance, interest payment for mortgage, rates). You take the values, convert to Aus$ (the ATO site has the "official" foreign exchange rates for different months) and then declare it in your tax return for the tax year in which the event occurred.

Any previous gain in value is not an issue here - but if you are renting the property out, then it is no longer your primary residence and might be liable for CGT in the UK.

Not sure of the CGT rates in UK, but here it is assessed as income, I believe, so if you are a high earner you will lose 47% in tax :scared:

Unless you leave UK on 5 April and do not get here and start earning until 1 July there is a nasty period where you can be a tax resident of both UK and AUS which is fun to sort out (NOT).

I would definitely advise getting professional advice

Cheers,

DagBoy

Disclaimer - all of the above could well be bollocks

S Oldfield

to make life easier....why dont you sell before you go????????/

Wol

I would think, Dagboy, that all the numbers you quote would have to be in AU$ - so the exchange rates come into play in a possibly big way.

It's possible to make a loss but be charged CGT in another tax environment because that's where the numbers apply. The ATO won't be interested in the sterling figures, only the AU$ ones.

Alan Collett

Yes, I can, but it is an area of advice where I earn my living ... you have to consider Income Tax and CGT in the UK and Australia, and Inheritance Tax in the UK.

If you would like a no obligation fixed fee proposal for my advising you please feel able to send me an email or a PM from this site, setting out the details again.

Best regards.

topcat

I can't offer any advice on CGT, but concerning the rental income as I understand it you will pay tax on the profit (i.e. income less mortgage interest, agency fees etc. etc.) in both the UK and Australia once you are an Australian resident.

Even if you are no longer resident you get the full UK tax free threshold, and you can arrange to receive the rental income tax free then pay the tax owed each year when you fill in your tax return.

You can also claim a credit for the UK tax paid on your Australian return so will effectively only pay Australian tax at their wonderfully high rates... and any rental income will also be taken into account when dedicing whether you have to pay the medicare levy.


There are a number of threads about tax and renting on this site, try the search engine.

TC

p.s. I'm not an accountant: the above is my personal understanding of the rules but I'd advise careful study of the IR and ATO websites

NoodleSYD

I'm going to cross post this one as it's relevant here too (for clarifying the UK side)

Be careful about holding on to UK property once you've moved.
The Inland Revenue's guide IR283 says that once you have vacated a UK property for three years (and continue to own it) you become liable for capital gains tax on the gain over the entire period of ownership. As with everything else, it's complicated but read this.

And as far as bringing the proceeds over are concerned, my accountant says that AUSTRAC and the ATO require a Capital Gains clearance certificate from the Inland Revenue to demonstrate that no capital gains tax is due on the sale of your property.

Alan Collett

The link you have quoted (which is to the Guidance Notes accompanying the capital gains supplement to the UK Self Assessment personal Tax Return) assumes you are UK resident and ordinarily resident. If you are NOT resident and ordinarily resident the capital gains tax position in the UK is very different - read booklet IR20.

Please ... don't look at various extracts from the Inland Revenue and the ATO's website in isolation as they can be misleading if you don't see the contents in the right context. The tax at stake with property can be significant, and I would therefore recommend that you take professional advice if you are uncertain - or even if you think you know the position and want comfort before making decisions about your investments and finances.

Re your final paragraph: I have not experienced the AUSTRAC/ATO requirement you have mentioned - it is the first I have heard of it. Have you and/or your accountant had first hand experience of it?

Best regards.