AusDream

Decided did not want the stress of renting out our home so now looking to sell it and putting the cash in a bank account for the couple of years we are in Aus.

Bit of internet research says to me that if I leave it in the UK and get say 6.35% (Gross) then, as me and the wife as commonwealth citizens still get a personal allowance, we pay very little tax on the interest....others found the same?

Is this better than bringing it into Aus and poppiing it in the bank?

Cheers

Grayling

The ATO will count any interest as income and tax you accordingly.

Any overseas income is taxed.

G

Caroline B

As a 457 visa holder, I am entitled to my UK tax allowance and therefore get rental payment from my UK home free of tax. But I have being trying to get my bank to pay my interest gross, and have had no luck so far so will have to claim it back

Nursebank

So if you sold your house in the UK, and any equity you recieved deposited it into a UK building Society.

The interest was paid into your current account in the Uk,

say for example;

Money held within the Nationwide Savings account UK, monthly interest paid into Barclays current account UK.

While residing in OZ on a PR visa, you withdraw the interest from your Westpac current account OZ.

I say Westpac because there is a link up with Barclays regarding ATM costs, free use of the Westpac ATM's while in OZ, if you are a Barclays customer in the UK.

You get taxed on your interest in the UK, as the Nationwide tax your savings deposited at 20% source, so:

Are you still liable to be taxed again in OZ? Yes and No?

My guess is, that you will not be taxed on the interest recieved from the lump sum held in the UK savings account, as you are taxed in the UK, as it is held in the UK. But only on the monthly interest payment while held in your OZ bank account?

So when the interest which is recieved monthly, and held within your OZ bank account, then this amount will be liable for taxation by the OX taxation system.

So withdraw the monthly interest payment as soon as it is paid into your OZ current account, that way you are not recieving any interest on your interest payment in OZ, so are not liable to be taxed on it?


So for example.

100k held in the Nationwide UK, paying 5k per year interest Gross.

5k minus 20% tax = 4k

4k divided by 12 equal monthly payments = £333.33 pounds sterling

£333.33 pounds multiplied by 2.25, exchange rate, just for example, obviously there may be a transaction cost as well.

Equals $750 Australian Dollars per month to pay the rent until you decide to move the money over to OZ.

So you withdraw $750 Australian Dollars from Westpac each month.

My guess is you will only be liable by the OZ taxation system to be taxed on the $750 while it is held in your Westpac bank account in OZ.

I look forward to being corrected if i am wrong?

AusDream

Nursebank - think you need a taxpert as this is quite involved. It seems logical though

Grayling - On the UK side if you are on a 457 I thought that income earned outside Aus is not caught in the Aus tax system

Nursebank

I am no taxpert, but do like numbers, so here is my guesstimate,

I am only assuming, so do not take this as gospel, i am just a nurse, and it will not be my problem.


Taxation on savings income differential between OZ and the UK
assuming the same gross interest rate of 6% in OZ and the UK.

Note; no other income taken into consideration in both the UK and OZ.

Lump Sum = 100k held in a savings deposit account.


UK

100K @ 6% Gross = 6k

6k minus 20% savings tax = £4800.00 per year


Exchange rate including transaction costs = 2.25


OZ

225k @ 6% Gross = 13.5k

13.5k minus tax based on

http://calculators.ato.gov.au/script...putDetails.asp

Tax = $1125.00

Medicare based on

http://calculators.ato.gov.au/script...care.xr4&go=ok

Medicare levy = $0.00 as you are below the threshold.

13.5k minus tax (1125.00) = $12375 per year

12375 divided by the exchange rate of 2.25 = £5500.00 per year

£5500.00 minus £4800.00 = £700.00


A rough calculation i know, but you are taxed less in OZ than in the UK
assuming the income from the 100k is your only income?

£700.00 better off?

AusDream

boy you do like numbers

Only thing I noticed is that for UK interest each spouse gets c£5.5k income tax free (personal allowance) so that covers most of the interest earned each year.

Thanks for giving your view - will be checking out those links

Alan Collett

Note that as a 457 visaholder you are a "temporary tax resident" of Australia from 01/07/2006, which means investment income and capital gains deriving from outside Australia are NOT taxable in Australia. They may also not be taxable anywhere else ...

Best regards.

LisaD_uk

Can someone answer me this out of curiosity if you sold your house in the UK and put it into a UK savings account and then went to live in Oz (PR) and didn't draw on any of the interest at all and then came back to UK after say 4 years would the interest made still be taxable in Oz? and/or UK.

Alan Collett

It all depends ... on your visa status, your domicile, residency, etc.

This said, if you move to live in Australia as the holder of a permanent residency visa the interest income is assessable in Australia, irrespective of whether or not you draw on the interest, or remit it to Australia.

Best regards.

LisaD_uk

Thanks for that.
All this capital gains tax has got me in a right tiz, after deciding to rent the house out from the beginning and now 2 months before we go we have decided to sell. I don't want to loose money and is it really worth all the hassle of renting your house to god knows who and making hardly anything to have the tax man then take their cut and if we did decide to sell in say 3-4 years down the line they then tax anything made on the house, surely you should be entitled not to have the profit from a house sale taxed if you are putting it into another property, sorry i just don't understand all this and it gives me a huge headache.

Wol

Welcome to the joys of the Property Owning Democracy!

Before we came out to Oz we sold a villa in the States which we'd owned for six years. We made a modest gain in US$ terms, and paid US Capital Gains tax on it - but when we remitted the proceeds back to the Uk we had actually made a loss in £ £ because the exchange rate was very different. So we effectively paid tax on a loss!

Just something to think about for those who intend keeping property in the UK and moving to Oz.

Nursebank

I agree, So


http://www.ato.gov.au/individuals/co...u=5053&mfp=001

OZ Taxable Bands table 2007-08 ($)

No Tax Threshold $1 – $6,000.00


http://www.hmrc.gov.uk/rates/it.htm

UK Taxable Bands table 2007-08 (£)

No Tax Threshold £5,225.00

10% Tax Threshold £0 - 2,230.00



Exchange rate including transaction costs = 2.25

Uk threshold in comparison to OZ

5225 multilied by 2.25 = $11756.25

11756.25 minus 6000.00 (OZ threshold) = $5756.25

You can earn the amount 0f $5756.25 equal to £2558.33 sterling in the UK tax free before paying tax like you would in OZ.

So i would guess you would actually be worse off in OZ, as there Tax regime hits harder than the one in the UK?

AusDream

thats where I got to aswell.

The more I hear about the property bubble the more comfortable I feel it is right to sell and put the cash on deposit. If I stay away 2-3 years then I am only worse off if house prices increase at approx 5% per year on average.

Just need the bloody visa from the Sydney office.

Nursebank

I would also agree, bubbles have a tendancy to pop rather than deflate at a speed which you can easily watch?

The way base rates are going, maybe put the house sale equity on deposit for a while, and see which way the wind blows. If the bubble keeps inflating, maybe bigger the bang hey, who know's?

http://news.bbc.co.uk/1/hi/business/6260140.stm

http://firstrung.co.uk/articles.asp?...383&cat=44-0-0