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littlehippy

Capital Gains could be charged on British Expats Homes

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My husband and I are moving to NSW on 12 Nov, which is the day he starts to be paid by the Australian govt and becomes an Australian tax payer. I am travelling with him and our children but I will continue to be paid by the UK govt until 1 June 2014. So presumably I will be a UK tax payer until then.

 

Our house is on the market in the UK. We are not liable for CGT as it has been our main residence. It is in joint names.

 

We have a rental house in NSW but intend to buy within the first 12 months.

 

If it sells after 12 November, what CGT will my husband have to pay and to whom? From my googling so far, I think he will pay nothing to the UK govt but might be taxed by Australia if we buy within 6 years of arriving or I am totally confused? Also, it seems that he will have to pay only the increase in value on the property since arriving in Australia (including exchange rate fluctuation).

 

And if we rent the house out and then sell in 12 months time, does he pay income tax on that in Oz and me in UK?

 

Very grateful for any help. Someone has put in a silly offer on the house and we need to know whether to accept tomorrow morning on the grounds that if we reject it and hold out for a higher price, any increase will be partly wiped out by hubby having to pay CGT in Oz which he isn't liable to here.

 

Many thanks.

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Sorry forgot to say - I have dual citizenship UK and Australian (resident UK 20 yrs) and hubby is coming over on a permanent visa I believe through work but obviously if not he can get that through me in time.

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Anyone? Sorry, I am finding conflicting information (or confusing and seems to be conflicting) on the australian tax website which I am reading as saying that CGT not applicable at all because exempt CGT in UK, and then elsewhere saying CGT applicable on increase on increase in value/profit calculated from the date of being an oz tax payer (and worked out in dollars).

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Firstly I am not sure why you think you will be a UK tax payer when you are living in Australia, this is not something you can pick and choose. If you are carrying out your work whilst in Australia then you pay tax in Australia, your company will have to work out how to do that, could be that you need to set yourself up as a contractor as it could be complicated for their payroll system. However the payroll complexity, does not mean you can continue to be a UK taxpayer.

 

Re the house, I don't see a CGT issue, if you only ever have one house at a time then it is your principle residence and no CGT gains.

 

Your situation and your husbands situation is identical as again you cannot just declare yourself a UK taxpayer for convenience. When it comes to rental income, as the house is in the UK the UK tax man gets first bite of the cherry. So you both declare your net income on the UK tax return. The Australian taxman gets second bite of the cherry, so (unless you are on a 457 visa) you both declare the net rental income on your Australian tax return too. The difference is on the Australian return you would note how much tax you already paid to the UK taxman and you get the benefit of a credit from the Australian taxman so that you do not pay twice.

Edited by Rupert

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Rupert, thanks for your reply and advice which helps to clarify our situation.

 

I will not be an Australian tax payer until 1 June 2014 because I will be UK taxpayer until then - fully employed by the UK govt but on maternity leave, so technically I will be on holiday in Australia and will be returning briefly to the UK in May to finalise my UK affairs. My employment with UK govt terminates on 31 May 2013.

 

My husband will be an Australian tax payer from 12 November 2013 because that is the day he becomes a full-time employee of the Australian government.

 

So my situation and my husband's situation are not identical. I am not emigrating to Australia on a visa, I am an Australian citizen returning home after 20 years in the UK and travelling on an Australian passport. My husband is emigrating on a work visa (permanent) and will be provided with his Australian papers by the High Commission in London on the day we fly out - he is joining the RAAF.

 

And I will not be employed in Australia for at least my first 12 months in the country - I have a toddler and a baby and will be staying at home and not earning.

Edited by littlehippy

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not sure if this helps, I am as far removed from being an account as is humanly possible, however I spoke with my accountant quickly at tax time this year ref our house in the uk which at the time we were renting and what we may be liable for ref CGT. I was of the belief that as it was my main residence and did not own another property in Oz then I would not be liable for CGT. I don't recall why I thought that but I did none the less.... He stopped me there and asked if I had done some research on the subject, I had not. He then told me that once we sold the house ( WHICH WE HAVE JUST DONE AFTER 2 1/2 YEARS !!!! HOO BLOODY RAY) then we had to see him again and all would be explained and formally written down so as no mistakes could be made..... He would not talk about it any more - mostly because he was doing my tax return and secondly he did not have the full facts of our tax situation to consider the options..

This most certainly got me thinking as at the time we had not sold our house. I spoke with a mate who is a bit of a property investor, and he explained it like this:

It is irrelevant if it was your only residence as you now rent it out to make or lose money. calculations will be made based on the purchase price, sale price and the dates of ownership / rental etc. so say like us we rented it for around 18 months then we will be liable for CGT for that 18 months based on their calculations of sale price etc. so essentially I now believe I will pay some form of CGT, and I fully expect and believe my accountant will absolutely minimise in any way he can the amount we are due to pay. I am ok with this as my mate said..... paying tax isn't a bad thing - it means you have made money, you generally don't pay tax on losses and god knows the aussies like to negative gear to the enth degree.

hope this helps and once I get the money from the sale to Oz and see my accountant I will let you know exactly what happened.


made the move, living the dream, happy families and happy days ....

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As far as i am aware (we also rent out our UK property) CGT is payable on the difference of the value of the property when you started renting it out and when you sold it, e.g. when we changed our mortgage to a buy to let we had a valuation done for the bank which was 175,000GBP, if we sell our property in the future, for instance, for 200,000GBP we would pay CGT on the difference of those two amounts (25,000GBP).

 

I could be way off the mark and there may be a lot more to it than this, hence when we sell we will check with an accountant.


IELTS passed Nov 2010: ANMAC applied 9/3/11, +ve 28/6/11: Vic SS applied 11/3/11, granted 29/6/11:176 applied for 29/06/11, CO assigned 21/07/11: Meds bkd 17/8/11, finalized 29/8/11: VISA GRANTED 31/8/11

 

 

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Rupert, thanks for your reply and advice which helps to clarify our situation.

 

I will not be an Australian tax payer until 1 June 2014 because I will be UK taxpayer until then - fully employed by the UK govt but on maternity leave, so technically I will be on holiday in Australia and will be returning briefly to the UK in May to finalise my UK affairs. My employment with UK govt terminates on 31 May 2013.

 

My husband will be an Australian tax payer from 12 November 2013 because that is the day he becomes a full-time employee of the Australian government.

 

So my situation and my husband's situation are not identical. I am not emigrating to Australia on a visa, I am an Australian citizen returning home after 20 years in the UK and travelling on an Australian passport. My husband is emigrating on a work visa (permanent) and will be provided with his Australian papers by the High Commission in London on the day we fly out - he is joining the RAAF.

 

And I will not be employed in Australia for at least my first 12 months in the country - I have a toddler and a baby and will be staying at home and not earning.

 

Again. You cannot pick and choose where you are tax resident based on convenience. If you intention is to move to Australia to reside, then you are resident for tax purposes. You can try and convince yourself otherwise all you want, but you and your husband cannot move here together to live and have different tax residency status. You are not on holiday. You have moved here. You are tax resident.

Edited by Rupert

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22/02/11 First employer interview - 06/04/11 Second employer Interview - 13/05/11 Offer of employment - 05/06/11 Documentation submitted - 08/06/11 457 Visa application lodged. 28/06/11 - Applicant Approved 27/08/11 - Arrived Sydney, NSW.

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That's just not cricket! :realmad: Why should you pay tax on what is / was essentially your primary residence?? Fair enough to tax the property investors who buy and sell houses for a living, but not those whose only property is the one they are selling (and are renting in Aus and only selling to buy over there).

 

I-F

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I am now getting very worried about CGT. A year after we started renting the house out, it was valued for re-mortgage at a whopping 30% less than we paid for it in 2007. So it looks like if we sell it for more than that low valuation, we have to pay tax on the difference? Even though we actually paid a lot more? It kind of defeats the purpose somewhat of keeping hold of the stupid thing to try and recoup some of the loss - we'd be lucky to get back 80%+ of what we actually paid and yet it sounds like there's a CGT liability just because the market bottomed out when we started to rent it out! Really not worth all the hassle, worry and expense we've encountered the past 2 years!


She'll be right!

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That's just not cricket! :realmad: Why should you pay tax on what is / was essentially your primary residence?? Fair enough to tax the property investors who buy and sell houses for a living, but not those whose only property is the one they are selling (and are renting in Aus and only selling to buy over there).

 

I-F

 

Yep I just had a rant about this on another CGT thread. Sounds like even though we'll probably sell at a loss on what we paid for our primary residence, because the house's value sropped massively when we rented it out we're deemed to have made a gain which is ridiculous! We may need to get shot of the house in the next year or so as we don't want to own it if we manage to get PR. Could apply for PR now but we're delaying it 'cos a new tenant just moved in and we didn't want the house empty through winter! Crazy!

Edited by paisleylass

She'll be right!

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Even if introduced there are plenty of exemptions in the current rules. The last 36 months are relieved as long as it was previously your main residence for example. If you keep the house for longer than 3 years after moving away then it cannot really be considered a main residence. Exemptions apply if you move back to the UK and live in it again. If you keep it as an investment and sell it for more than it was worth several years after moving then you may be liable to CGT but annual exemptions apply. If the house is jointly owned these exemptions double effectively so your profit will be sizeable before any tax arises. And that profit is a Capital Gain on an investment. It's just a question of who has jurisdiction for the tax on that gain. I suspect that any tax you pay in the UK will be relieved against the Capital Gain that would have arisen as an Australian taxpayer under double taxation agreements. I stand to be corrected on all of this but overall I do not think it will impact greatly on expats.


Timeline: 309/100 Sent 7/8/13, Money Taken 9/8/13, CO appointed 3/9/13. Med 3/12/13. Police check 4/12/13. VISA GRANTED 8/4/14, Subclass100. Recce August 2014. Arrived 30 July 2015.

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Great idea, They should of done this in Oz years ago. The bubble in this country is massive and should of been controlled.

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A couple of observations:

 

* Let's wait for the details. As already noted, there are a number of exemptions where a property that was formerly a main residence is let for a period of time before being sold.

 

* Australia already taxes investment property located in Australia that is owned by non-residents. What's more a capital gain arising on Australian real estate owned by a non resident cannot be reduced by the CGT discount, and the first $ of gain will be taxed at 32.5%.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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I am now getting very worried about CGT. A year after we started renting the house out, it was valued for re-mortgage at a whopping 30% less than we paid for it in 2007. So it looks like if we sell it for more than that low valuation, we have to pay tax on the difference? Even though we actually paid a lot more? It kind of defeats the purpose somewhat of keeping hold of the stupid thing to try and recoup some of the loss - we'd be lucky to get back 80%+ of what we actually paid and yet it sounds like there's a CGT liability just because the market bottomed out when we started to rent it out! Really not worth all the hassle, worry and expense we've encountered the past 2 years!

 

There are exemptions possibly available to you - eg the 6 year letting exemption if the property was formerly your main residence and you don't own another property which you designate as your main residence.

 

Might be worth a chat with my GM Tax colleague Chrissy Redwood on Brisbane number 07 3112 2925.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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Yep I just had a rant about this on another CGT thread. Sounds like even though we'll probably sell at a loss on what we paid for our primary residence, because the house's value sropped massively when we rented it out we're deemed to have made a gain which is ridiculous! We may need to get shot of the house in the next year or so as we don't want to own it if we manage to get PR. Could apply for PR now but we're delaying it 'cos a new tenant just moved in and we didn't want the house empty through winter! Crazy!

 

If you are a temporary visaholder gains on overseas real estate are not charged to tax in Australia.

 

The situation changes once you obtain permanent residency though.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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I am now getting very worried about CGT. A year after we started renting the house out, it was valued for re-mortgage at a whopping 30% less than we paid for it in 2007. So it looks like if we sell it for more than that low valuation, we have to pay tax on the difference? Even though we actually paid a lot more? It kind of defeats the purpose somewhat of keeping hold of the stupid thing to try and recoup some of the loss - we'd be lucky to get back 80%+ of what we actually paid and yet it sounds like there's a CGT liability just because the market bottomed out when we started to rent it out! Really not worth all the hassle, worry and expense we've encountered the past 2 years!

 

Hi, Surely the base rate for the UK CGT would be the amount paid in 2007 not the 30% lower rate quoted?

Any Australian CGT would be the value in AUD on the day you arrived in Oz if you are a PR holder and this may be mitigated by a higher AUD. Also if the UK government go ahead with this they may set the Base rate on the day they implement the change.

Edited by winter1

:confused:

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It has just been announced that UK non residents/Expats will be liable to Capital Gains tax on property but only from April 2015


:confused:

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If you are a temporary visaholder gains on overseas real estate are not charged to tax in Australia.

 

The situation changes once you obtain permanent residency though.

 

Best regards.

 

Alan, do you know if this is also true for shares? I have posted here but no replies yet.

 

I thought you would be subject to CGT in Australia from a) the day you arrive or b) the day you start work and pay tax

Edited by TheGreatDane

31/8/2012: application submitted | 03/09/2012: CC charged | 04/09/2012: CO assigned (SV) | 08/05/2013: medical check done | 16/05/2013: visa granted

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Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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OK, We went to the accountant a little while ago to find out if we were liable for CGT as I did not want to get a tax bill at tax time. We had a short meeting and gave him our background, ie dates when entered the country, bought /sold the house etc. He came back with it written on paper that we are NOT liable for CGT. there was some bumf put in with the letter which was a bit confusing but what I can make out is that there is some form of 6 year rule combined with owning no other properties in Oz. This cost us $400 but in my opinion well worth it as I now know without any hesitation that I will not be liable to CGT. it is a lot of money to have to fork out but better that than spend what we made on the house only to find out at tax time we owe a few grand .... hope this helps clarify things a bit


made the move, living the dream, happy families and happy days ....

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