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Guest radbt

Capital Gains on our UK house

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Guest radbt

Just arrived. We probably won't sell ur UK house for a few years. Capital gains on your primary residence in UK is easy to avoid (even if you let), but the Australian Tax man probably sees our capital gains in UK as fair game (fair enough really). As we bought in 1990 the paper capital gains are huge (but everything else has gone up just as much, including here in Oz), and it would a disaster to have to pay a large slice of it in tax. Any idea about the rules of the Aussie tax on capital gains on a residence abroad? Any idea how they are applied - can we still nominate our UK house as our primary residence and if so for how long? When I know the basics I will probably pay for tax advice (very cheap at the price, potentially) but I find that it is useful to get your head around a problem before the experts bamboozle you with detail and try to sell you a complicated scheme to solve a problem that you could do for free yourself.

 

Cheers, and thanks,

 

radbt

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Guest Liam

Ok this is from my own personal experience and as it is tax orientated it is not meant to be specific advice but only my general comments based on personal experience. So seek your own tax advice specific to your circumstances.

 

The basic rule is that you do not pay Capital Gains Tax on your main residence if you sell it within 6 years of leaving it, so that is the starting point.

 

Under Australian Tax rules you have 6 years after leaving your main residence (home) to sell a property without paying any Capital Gains Tax if you don't buy another home in the meantime.

 

Now if you do buy a home you can then elect to claim the CGT exemption on your first home up to the date you moved in to the new home and then choose to apply the exemption to either of the 2 houses (whichever does have a Capital Gain ...if you are so lucky).

 

Now if you intend to stay in your new home long term you would probably claim the full CGT exemption on your UK home. If you do decide to this I would suggest having a local real estate agent give you a written estimate of your Australian Home on the date you sell your UK Home (make sure and ask for a value for stamp duty puposes..he will know what i mean!). This gives you the difference between the price your paid on the purchase date and the value at the time your new home becomes your main residence for CGT exemption purposes (the idea is to keep this as low as possible in case it is ever needed).

 

There is no tax on the lump sum of money you move to Australia but you may pay some tax on any earnings on those funds while they were sitting in a UK bank account as Aussies are taxed on their worldwide income and there is reporting between UK and Aussie ATO. But if you have paid withholding tax in the UK you will get a tax credit here (basically you can be sure that you will not be taxed twice)

 

Hope this helps and remember to get personal advice on your own tax circumstances.

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Guest nejpinkett

Hi

 

We are in the same boat with not selling our UK house, but had a meeting with Prismexpat yesterday who said that the Australians only count your house in the UK as your primary residence for up two years after 2 years even if you don't buy it is then classed as an investment? I am now confused reading the above post with the mention of 6 years providing you don't buy in that time. he also said to get the valuation done on the UK property at the time you buy a house in the UK because it is only the growth after this time that is eligible for capital gains, which made sense yesterday, now I am not sure. We have a house that we can't sell at the moment and will rent out with a view of selling in 3 years, but we planned to buy in OZ once we have stable jobs etc as we have a deposit ready. I am now confused again. Did we get told the wrong things yesterday?

 

A confused Natalie

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Guest Liam

Natalie

 

I don't mean to smart and I am not a tax agent but ask Prismexpat to show you any Australian legislation that refers to a 2 year rule on the main residence exemption. All Australian tax literature and web sites on the main residence exemption refer to the 6 year rule. I would be really interested to see the legislation referring to 2 years. Here is a basic site on CGT in Australia CGT Main Residence Exemption

 

If you move over here and buy a house then you will have 2 homes and you must indicate which one you are now claiming for the main residence exemption.

 

If you choose the UK house the it will remain CGT exempt for 6 years from the time you left it. If you sell the Aussie house in the future you will be liable for CGT on the period it was not covered by the CGT exemption.

 

example: Own UK home since 2002

Move to Oz in 2008

Buy home in OZ in 2010 but claim main resicence on UK property

Sell UK home in 2013 - No CGT as within 6 years of leaving UK

Sell Aussie Home in 2018 - CGT on period 2010-2013 and exempy for 2014-2018

 

If you choose the Aussie House as the main residence then you receive the CGT exemption on the UK house up to the date of purchase of the Aussie house and you receive the CGT exemption on the Aussie House going forward.

 

example: Own UK home since 2002

Move to Oz in 2008

Buy home in OZ in 2010 and claim main resicence it

Sell UK home in 2013 - CGT on period 2010-2013

Sell Aussie Home in 2018 - No CGT as Exempt for full period as main residence

 

The only mention of a 2 year rule I could find was for the CGT exemption on the sale of a property inherited from a deceased estate...that's a whole other matter!

 

This is just General advice so please seek advice on your own particluar circumstances from a registered tax agent in Australia.

 

best wishes

 

Liam

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Natalie,

 

I agree with Liam about the 6 year exemption for income generating property.

 

Can you please report back with your further findings after you have asked Prism to verify their comments as to the existence of a 2 year rule?

 

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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Guest nejpinkett

Check the web site and it does mention 6 years, which is a relief to us, these advisors don't half confuse you. I will e mail him and ask him what he is referring to with regards to the 2 year rule, as I did ask him a few times with regards to us renting for a couple of years while the housing market sorted itself out and he did mention this 2 year ruling, but so much information in this meeting. He never once mentioned the 6 year excemption so a bit cross about that. I will let you know what I find out.

 

Cheers

 

Natalie

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Do you not have a summary of some kind in writing, Natalie?

 

The danger with meetings is possible misunderstandings as to what was and wasn't said ... all advice of a substantive nature that we give to clients (whether relating to visas or tax) is in writing.

 

We also have some free tax factsheets if you are interested:

Collett & Co

 

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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Guest nejpinkett

The meeting was generally about possibly transferring pensions, but raised the issue about having to rent the house out and we asked the question about tax implications with regards to this and then transferring money at a later date. we don't have anything in writing as of yet it will be forwarded to us with other documentation. We may have misunderstood stuff in the meeting as we also have a share in another property which we can't have until my husband's mother passes away. I will speak to him again as we are now worried as we parted with £800 to sort out our pensions and to find out whether it is worth transferring into an Aussie pension scheme, so starting to worry about this now as we have about 38 years of teachers pension between myself and hubby and now wondering if we have done the right thing in even considering transferring this to Aus . To confusing and too much to worry about. We would love some free tax fact sheets.

 

Cheers

 

Natalie

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The meeting was generally about possibly transferring pensions, but raised the issue about having to rent the house out and we asked the question about tax implications with regards to this and then transferring money at a later date. we don't have anything in writing as of yet it will be forwarded to us with other documentation. We may have misunderstood stuff in the meeting as we also have a share in another property which we can't have until my husband's mother passes away. I will speak to him again as we are now worried as we parted with £800 to sort out our pensions and to find out whether it is worth transferring into an Aussie pension scheme, so starting to worry about this now as we have about 38 years of teachers pension between myself and hubby and now wondering if we have done the right thing in even considering transferring this to Aus . To confusing and too much to worry about. We would love some free tax fact sheets.

 

Cheers

 

Natalie

 

Natalie,

 

See the attached.

 

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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Guest radbt

Thanks to you all. I was particularly grateful for the worked example from Liam. I understand now that our capital gains in UK since 1990 are safe, and the clock will only start ticking when we buy a second house and if we opt to make our new Aussie one our primary residence. So we are not going to have to pay hundreds of thousands of dollars tax "earned" on capital gains the nineties and up to 2007 (which only kept us in line with housing inflation). We can cope with capital gains starting now (we should be so lucky - its all negative!).

 

Radbt

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Guest AndrewL

Quite simply, rent it, don't rent it, do what you like but so long as it's been six years since you last lived in it (and it is your "main residence" under domestic tax law) then there is no Aus CGT.

 

There is no UK CGT as you have sold the asset as a non-resident.

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Quite simply, rent it, don't rent it, do what you like but so long as it's been six years since you last lived in it (and it is your "main residence" under domestic tax law) then there is no Aus CGT.

 

There is no UK CGT as you have sold the asset as a non-resident.

 

Hmmm .... not sure about that Andrew (ie the availability of the CGT exemption under Australian tax law if the property does not derive an income).

 

See also here:

Treating a dwelling as your main residence after you move out

 

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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Guest AndrewL

Hi,

 

As long as you still class it as your main res, then the exemption remains. Like I said, it needs to still be classed as your main res for the purposes of domestic law. The ATO website is, of course, a good start but whilst I can't quote from the legislation right at the minute (so can't state the actual wording), you shouldn't just go with the website. Not that you would of course Alan, knowing your background.

 

Cheers, Andrew

 

Hmmm .... not sure about that Andrew (ie the availability of the CGT exemption under Australian tax law if the property does not derive an income).

 

See also here:

Treating a dwelling as your main residence after you move out

 

Best regards.

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Guest nojo

Dear Laim & co

most useful info thanks -

further to that - if we elect the uk house as main residence, having bought here in oz a year ago - does that make oz property an investment property and hence we can claim back mortgage etc against tax ?

most grateful for your thoughts

jono

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