chris-nicola-ellie.

Hi all,

We are moving to Perth in Jan12 but are not going to sell our house for a few years in the uk, I know we will be taxed on rent earned but will we be taxed on the whole amount when we do eventually sell and bring over the money, and am I right in thinking that any money we bring into the country on arriving won't be liable for tax ??

Thanks in advance for any advise.

Kiwipaul

The simple ans is no you won't.

BUT

If you buy a house here before selling your house in the UK you can only have one Primary place of residence (PPOR). So once you buy here your house in the UK becomes an investment property and from this point on if it increase in value (In A$ terms) the gain when you sell it becomes liable for CGT in Oz.

This is ONLY the gain from the point of it becoming an investment property to the point at which you sell it. Also selling costs are deductible from the gain.

If you just rent here you can keep your UK house as your PPOR for 6 years before you become liable for CGT on it.

chris-nicola-ellie.

Thanks very much, info greatly appreciated.

Alfresco

Thank you.

At what value will it kick in for CGT?

Kiwipaul

Not totally sure what you mean.

If you buy a house here after 12 months you would then get your UK house valued at that point (converting to $A at the then exchange rate). This would then be the base value for any CGT calculation in Oz.

This also assumes you decide your new Oz house is going to be your PPOR as soon as you buy it. You don't have to declare which is your PPOR until you sell one of them which gives you a lot of flexibility to maximize your gains.

This is getting a bit detailed and stretching my knowledge and dosn't take into account any UK tax liability.

Alfresco

Thank you. That's very informative and interesting.

DaveandLinda

I believe if you sell your house and put the money in the bank in the UK and wait until the exchange rate is more favourable before bringing your money over you are liable for tax on any difference you have made due to the increase in the exchange rate.

Kiwipaul

That is correct BUT you would have to tell the taxman about it for them to know. Also if the exchange rate went against you and you lost money you could claim the loss as a tax deduction. This is designed for companies and I doubt they would chase up individual people unless it was millions and they were doing it continuous by playing the exchange rate market.

Maybe another reason for keeping your UK property as your PPOR and renting here as your PPOR is tax free for CGT purposes.

Dentonburn

A couple of questions:

We are an unmarried couple with two houses in the UK. Could we keep each house as a permanent residence for taxation purposes whilst renting in Australia?

How/when do you deem which residence is your "primary residence" for Australian tax purposes? When we eventually sell?



Thanks for any help,

Dent.

Kiwipaul

So long as the tax man dosn't find out you are defacto you could keep both houses as PPOR one for each of you for 6 years. BUT you must have lived in the property for at least (I think) 6 months. Even if they did find out I'm not sure what the situation would be. If you are married you both can have only one PPOR and it has to be the same place. If you are married and sep that opens up a whole new can of worms which is beyond my knowledge.

This is one of the many grey areas in Oz tax rules. The Oz gov aren't to clever at writing legislation without their being numerous holes in it.

EG

Even though you both own property you are both entitled to a first home owners grant in Oz for when you buy your first house. So you could get 2 grants so long as you bought 2 houses and lived in them for I think it's 12 months.

Dosn't matter how many properties you own or owned outside Oz you are entitled to First home owners grant on your first Oz house that you are going to live in.

You decide on your PPOR when you sell or transfer one of the properties.

Dentonburn

Thanks Paul, much appreciated.