Capital gains tax - selling property in the uk whilst PR in Oz.

[the beak]

Hi,

 

After a little info on CGT.

 

Assume Australian resident for tax purposes.

 

What would happen if UK house is sold ?

House is valued at X amount at time of coming to Australia as a perm resident - 2006

House is sold say in 2014 as a permanent resident of Australia.

 

Is any CGT –

The value of X (2006) and the exchange rate at the time (say approx 2.2) - minus any gain, i.e the value of X (2014) and the exchange rate at the time (lets work on it’s the same as now 1.6)

Reason for the question –

Is any so called “gain” in the price of the house, not actually a gain as the poor exchange rate at the current moment between the AUD and the Pound means the gain is reduced or even wiped out depending on the figures?

 

Or is it simply calculated on a forex gain and the value at migration to Oz is irrelevant ?

 

By this i mean house sells in 2014 for X. Money is held in UK awaiting favorable exchange rate. Money is transferred in 2015, as exchange rate improves from 1.6 to 1.9 therefore one has made a forex gain. Is this how, if any, capital gain is calculated ?

What if a house is sold, and the money is transferred shortly after with no real difference in exchange rate and hence no forex gain ?

 

Im thinking any forex gain is added to a persons taxable income and taxed according to what tax bracket a person falls into or are other values used.

 

Thanks for any info.

[Andrew from Vista Financial]

Hi

 

Firstly I would suggest that you seek the advice of a Tax Adviser in relation to this matter.

 

My understanding of the situation is that the house will be treated seperately to the funds in the Bank as these are essentially different assets once the house is sold.

 

Generally the house will be assessed for CGT based upon the value in Australian Dollars at time of Australian residence and then assessed in Australian Dollars at time of sale.

 

There then may also be exemptions and discounts apply depending on your situation to reduce any CGT if applicable.

 

The funds in the Bank are looked at seperately and there can be situations whereby tax is due on forex gains although this is an area that seems to be quite grey and somewhat complex (although my understanding is that generally monies of a domestice nature and or under a certain sum are exempt/ignored).

 

Generally gains if any are taxed at a person's Marginal Tax Rate (MTR).

 

Please do not rely on this information for advice and seek the services of a qualified Tax Advice so that they can give appropriate advice in relation to your personal situation.

 

Regards

 

Andy

Edited November 10, 2013 by Andrew from Vista Financial