vikki290

Hey all,
I am planning to return to the UK (Scotland) at the tail end of this year and own a property in Australia (Vic).

I know that if I have this, the Scottish gov will charge me more LLBT on the new house I’ve reserved as a second property tax.

I am debating whether to keep or sell the Aussie property and thinking it might be good to keep it given price surges expected for next couple of years. I’d have to consider and offset the additional tax cost to any gains.

I have looked at the capital gains tax in Australia and (if I’ve read it correctly) I can keep my Aussie property and rent it out and not incur capital gains for 6 years of moving out of it as it was my primary residence.

Has anyone been in this situation that can confirm if my understanding is correct?

Also are their any other things that I am missing re tax and property in two countries?

thanks!

cyrian

Hi
If you are intending to return to Australia then I would consider keeping the house.
If you have no intention of returning then I would sell the property and consider investing in the UK.
I do not know what joint taxation agreement the UK has with Oz but if I sell my property in France then I have to pay CGT in France and then declare the gain and tax paid in France to HMRC.
Under the UK CGT rules, I may have to pay further CGT in the UK.
I would not keep my French property if I no longer intended to visit it because of the added difficulties of dealing with international taxation.
You would also have to pay tax in Oz on your rental income.
The housing market in Scotland is lively at the moment (possibly a post Covid bounce?)
"The average house price in Scotland increased by 10.6% over the year to March 2021, up from an increase of 8.3% in the year to February 2021, with the average house price in Scotland now at a record level of £167,000.19 May 2021".
The buy-to-let market is strong in the UK.

House prices - Scotland

HTH

vikki290

Thanks for the insights. I doubt I’d return to live in Australia, it was more about investment as the property market here is on heat too! Another couple of years could be very profitable.

Reading the tax implications here, I think capital gains is only applicable after 6 years if I rent it, given it was my primary residence. It’s the international tax thing that worries me a little. Tax everywhere!

cyrian

OK but you need to read the UK - Australia tax treaty regarding the tax treatment of rental income and Capital Gains Tax.

ianandhelena

The following might be relevant to what you propose, as it sounds as though you would be a UK resident when you sold the Aus property: https://www.ato.gov.au/General/Capit...nce-exemption/

"A change in law on 12 December 2019 means if you are a foreign resident for tax purposes at the time you dispose of your residential property in Australia, you will not qualify for exemption from CGT unless you satisfy the life events test.

You satisfy the life events test if, at the time of the disposal of your residential property in Australia:

• you were a foreign resident for tax purposes for a continuous period of six years or less and, during that time, one of the following must have also occurred:
  • you, your spouse, or your child under 18, had a terminal medical condition
  • your spouse, or your child under 18, died
  • the CGT event happened because of a formal agreement following your divorce or relationship breakdown."

cyrian

"I am debating whether to keep or sell the Aussie property and thinking it might be good to keep it given price surges expected for next couple of years"

I just read a report in the Sunday Times that showed that UK house price increase in the last year were just one place above Australia.
That of course is the whole country and doesn't deal with local "hot spots" in the property market.