We are currently going through a 482 visa application and trying to decide what to do with our UK property, and would like some advice.
For the last two years we have travelled abroad and rented our UK home, we were still deemed UK tax residents during that period as we weren’t settled in one country and were not working. Now we are looking at a move to Oz, and just thought we’d keep our house and continue renting it, however the more I’ve looked into I’ve realised there might be some pretty big financial pitfalls.
We purchased the house (jointly owned by my husband and I) in Dec 2013 for £300k, lived in it until Oct 2017, during that time we did some extensive building work - we basically took the existing house back to brick work to start again and added an extension that doubled the size. The total cost of work was probably in the region of £150k, maybe as much as £200k. The house is probably worth £650k now. We didn’t keep all the receipts for the work we had done but I guess bank statements and credit cards could be used to get a more accurate record?
Our house is currently rented out, the monthly rent is £2000. Our mortgage is around £1600 (variable) with roughly half (£800) being interest.
So my questions:
1) If we continued to rent the house then the UK income I believe would come under the tax free threshold - is this correct? Would we still be entitled to the threshold as non resident?
2) if we rented the property would we have to pay tax on it in Aus? How is that calculated?
3) if we sold the property I understand we’d have to pay CGT. In terms of proving what we spent on improving the property what would we need to provide - would credit card statements be enough or would we need receipts and invoices for everything?
4) how much CGT would we pay if we sold now (using Dec 2019 for ease of calculations) versus if we sold in say two years time? My understanding is:
Owned property for 6yrs (72mths), lived in property for 47mths, Rented it for 25mths.
Gain on property (worst case) £200,000
£200k/72mths = £2777/mth
47 + 18 = 65 x £2777 = £180,500
so CGT liability = £19,500, which would be inside our annual threshold.
Alternatively if we kept the property and sold in two years time - Dec 2021:
Owned property for 8yrs (96mths), lived in property for 47mths, Rented it for 49mths.
Gain on property (I guess this would probably be a bit higher, circa 4% over two years based on current rises = value of £626k) £226,000
£226k/96mths = £2354/mth
47 + 9 = 56 x £2354 = £132k
so CGT liability = £94k. £24k threshold, so we’d pay tax on £70, at either 18% or 28%. (£12,600 / £19,600)
5) if we sell the house how do we work out if we are basic rate or higher rate tax payers? Our “normal” jobs would both be higher rate - but do they only look at UK income (ie. income from renting our property) or is is based on what we’d be earning in Aus?
thanks in advance for any help and advice you can give!