windsordave

This site is so awesome! How did people survive without it?

Anyway, I've searched the threads and got lots of bits of information on the rules etc associated with Capital Gains Tax on the sale of UK properties whilst a resident in Oz. Before I jump in and sell my beloved flat, I'd like to confirm my understanding of the situation with anyone out there whos

a) done this before
b) knows a lot about it
c) is incredibly intelligent and can guess an accurate answer

So, I am about to sell a property in the UK which is :

1. the only property I own
2. which has been rented out for 3.5 years whilst I have been here in Australia
3. which I lived in as my main and only home for 2 years prior to that

In terms of value, it has not rose in value significantly since I left the UK (although I did not get a valuation when I left to prove that).


So, my understanding is that:

1. I won't be subject to CGT here or in the UK since it is my main and only home and since Australia has this nice ruling that if I sell within 6 years of arriving it doesnt matter if it was rented out

2. Even if I was subject to CGT here in Oz it would be on the difference between the selling price and the valuation when I left the UK


Anybody got any input on this? Is there anything else I should consider (e.g. a 'good' time to sell in the tax year etc)

Thanks all ... and Happy New Year!!!

Dave

ectomorph

I 'believe' basically, that since it was your main residence up until you left the UK, you would only be required to pay CGT in the UK on the difference in value between now and when you left the UK. Subtract out of that all your expenses for maintaining the property.

JAJ

No, not quite. The difference in value since arriving is the maximum amount chargeable to CGT.

Reliefs for it being the principal residence may reduce this further

You cannot deduct repairs and maintenance for capital gains tax purposes, as far as I know (you can if you are renting and there is income assessable,but that's a different question). Only capital improvements are tax deductible for CGT.

ectomorph

agreed, i believe the poster mentioned it was rented out.

ljj

...So long as you haven't already bought in Oz you won't pay CGT.

We sold our house last July which had been rented out on and off since 2003. Spoke to the tax office and as long as we didn't buy in Oz before we sold in UK it was classed as our principal residence.


HTH

LJJ

steve99

Was that the UK or Aus Tax office? Any idea if it would make a difference whether you were tax resident in Australia or not? ie my parents have a property in both places but are not resident for tax in Aus. If they sell the UK property now and then take up sole tax residency in Aus I wonder if they would avoid CGT

ljj

Hi, this was the Oz Tax Office.

Don't think they will be able to avoid it (I'm sure there is some dodgy way of avoiding it but wouldn't risk it).

don't know in the case of non residents though - in my experience the tax office over here have been pretty good and they dont ask for your details. Just inquire "what would happen if my retired parents bought a house over here whilst still having one in the UK?"

Phone from a phone box if you are worried

LJJ

windsordave

... and did the UK tax office have an issue? Assuming that non-residents arent liable for UK capital gains tax then?

ljj

No they didn't,

but having said that why would I tell the UK tax office where I live over here? I am about to move into our first purchased house, at present we live in our second rental and we became Australian Citizens last year - never thought of informing the UK of change of addresses - apart from family I have no link with the UK. I'm Australian

Sorry I don't think that was much help to you was it? I've never heard of anyone having to pay CGT to the UK and we've got lots of friends who have sold their properties in the UK.

LJJ

MartinLuther

The Uk rules for a property that you lived in and rented out are as follows:
- You treat the last 3 years as if you lived there (regardless of whether you actually did or not).
- You calculate the ratio of the time you rented out over the time you lived there (in your case 0.5/5 = 0.1 = 10%). Remember you treat the last 3 years as if you lived there.
- Apply this ratio to your profit ('sale price'-'price you originally paid'-expenses).
- If this is less than £40k then you have nothing to pay. So in your case you would have to make a profit of £400k before you have to pay any tax. Yes, I did mean profit - I suspect that your probably under this limit

The other rule that you need to consider for the UK is that if you move away for more than 5 years and you don't sell the property in the tax year that you left (which is the case for you) then you are not subject to CGT.

As others have said, in Aus, you are exempt for 6 years as long as you don't buy another main residence. (I'm not sure what happens if you buy a rental property instead of a home.)

Looks like you'll be able to sell it scott free.

windsordave

Thanks Mr Luther - and everyone

Anyone have an email address for enquiries to the ATO?

Dave

Wendy

Here you go

http://www.ato.gov.au/default.asp?menu=244