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Carrying forward tax loss on UK property as part of Australian tax return?


sindirt

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Hi

My accountant having completed my UK tax return for myself and my wife (we have a couple of UK properties) is in the process of completing my Australian tax return. One of the properties had a fair bit of rennovation works, repairing the property after purchase, plus some capital works adding a bathroom etc. They are telling me that a significant portion of the loss on this UK property cannot be carried forward as is the case in the UK as a significant portion of the costs were incurred before we arrived in Australia. It seems somewhat unfair that this prior history is not taken into account as looking at the figures from our arrival the property would show a small profit, whereas in actuality if the whole history was looked at the property would be running overall a substantial loss. Is this correct? 

The property was purchased March 2015 and we arrived in Australia July 2015?

Many thanks

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On 16/10/2018 at 17:00, sindirt said:

Hi

My accountant having completed my UK tax return for myself and my wife (we have a couple of UK properties) is in the process of completing my Australian tax return. One of the properties had a fair bit of rennovation works, repairing the property after purchase, plus some capital works adding a bathroom etc. They are telling me that a significant portion of the loss on this UK property cannot be carried forward as is the case in the UK as a significant portion of the costs were incurred before we arrived in Australia. It seems somewhat unfair that this prior history is not taken into account as looking at the figures from our arrival the property would show a small profit, whereas in actuality if the whole history was looked at the property would be running overall a substantial loss. Is this correct? 

The property was purchased March 2015 and we arrived in Australia July 2015?

Many thanks

Rental losses arising prior to the commencement of tax residency in Australia are disregarded for the purpose of your Australian tax returns.

Similarly, any capital gains arising before you become a tax resident of Australia are ignored.

Are you claiming depreciation allowances in respect of your UK property on your Australian tax return?

Best regards.

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On 16/10/2018 at 19:27, Parley said:

If you still own the property you have not made any loss.

Capital improvements add to the cost base for when you eventually sell it.

Not if they took place prior to the commencement of tax residency - they will be reflected in the market value of the UK property at that time, which establishes the cost base for CGT purposes.

Best regards.

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