Wanting to sell the UK house and pay OZ mortgage but not sure of AU tax situation

[Guest vijnit]

So here goes guys.

 

Like a lot of migrants when we came over in June 2009, and decided not to sell our UK house, as we were uncertain whether we would settle properly in Australia, and having the house rented out in the UK was the safe option incase things didn't "Work out" over here.

 

Three and a half years later we have bought our own house here in Perth and have a hefty mortgage, and the time and decision has come to sell the UK house, bring the money over and significantly reduce the mortgage here so we can live the life we dreamed of.

 

But - here's the big BUT..

 

we have heard that if we now sell the house in the UK, we would be ripped apart by the Australian Tax here to take a massive Capital gains tax chunk, something like 50%, as we are selling our "investment" house.

 

Can anyone shed light on this ? is this so true ?

 

What have other people done when they've sold their houses and brought their money over a few years after migrating - have the AU tax people chased them down, or had issues ? or am i simply stressing out too much !

 

Cheers any ideas or tips would be appreciated.

 

Vijnit.

[jackboots]

Don't qoute me on this .. i thought you only paid tax from that country .. maybe you should contact moneycorpe or somewhere to check , we sold our house two years ago this november and we only paid up that end and just sent the money over with HSBC our bank .. we had rented it out for 3 years and decided to buy here so like you wanted the money for the house etc .. unless anything has changed in that time ?

[StraighttothePoint]

So here goes guys.

 

Like a lot of migrants when we came over in June 2009, and decided not to sell our UK house, as we were uncertain whether we would settle properly in Australia, and having the house rented out in the UK was the safe option incase things didn't "Work out" over here.

 

Three and a half years later we have bought our own house here in Perth and have a hefty mortgage, and the time and decision has come to sell the UK house, bring the money over and significantly reduce the mortgage here so we can live the life we dreamed of.

 

But - here's the big BUT..

 

we have heard that if we now sell the house in the UK, we would be ripped apart by the Australian Tax here to take a massive Capital gains tax chunk, something like 50%, as we are selling our "investment" house.

 

Can anyone shed light on this ? is this so true ?

 

What have other people done when they've sold their houses and brought their money over a few years after migrating - have the AU tax people chased them down, or had issues ? or am i simply stressing out too much !

 

Cheers any ideas or tips would be appreciated.

 

Vijnit.

 

Where are you currently being taxed? Are you being taxed as an Australian resident and do you submit an annual tax return to the Australian Tax Office (ATO)? If you are then under the Income Section, number 20/P you are asked if you currently own any assets outside Australia that are valued over $50,000. What have you been answering at that question? If Yes, because you may have been renting it out, then the ATO will have already covered the situation with additional questions. If you have been answering No you would need to advise them or else it could get messy especially if you have been renting it out and now you want to sell it. There may also be issues about which you home you are classifying as your main residence and the the CGT implications around which property you sell.

 

If you are not being taxed as an Australian resident for tax purposes then equally have you been advising the UK tax about your assets in Australia. Again messy unless you have been up front from the off.

 

The bottom line is you will need to pay tax, we all do, on any element of the "profit" level of the asset. This does not mean paying tax on the full amount you sell it for perhaps only on the difference between what you get for it less the amount you purchased it for. In addition you should be able to deduct reasonable expenses for keeping the property running from the total profit figure.

 

http://www.ato.gov.au/corporate/pathway.aspx?sid=42&pc=001/001/038 The Capital Gains page on the ATO website is a great source of information and should give you most of what you need to know. I am not a tax agent and/or expert but I worked it all out from these pages when we did it.

 

I suppose the bottom line is don't listen to hearsay and try and get all the hard facts yourself.

[JaynBev]

Oh to have a house in the UK thats worth anything!!

 

We're going to have to send money back to the UK just to cover the loss on the damn house we can't sell over there.

[jackboots]

You pay all your tax in UK while renting anyway our agents did that and we had to fill in all forms through solicitors etc I'm sure there was a huge thread on this on poms in oz not so long ago ... you could also ask on there as its a bigger site

[Rosshf]

 

The bottom line is you will need to pay tax, we all do, on any element of the "profit" level of the asset. This does not mean paying tax on the full amount you sell it for perhaps only on the difference between what you get for it less the amount you purchased it for. In addition you should be able to deduct reasonable expenses for keeping the property running from the total profit figure.

 

http://www.ato.gov.au/corporate/pathway.aspx?sid=42&pc=001/001/038 The Capital Gains page on the ATO website is a great source of information and should give you most of what you need to know. I am not a tax agent and/or expert but I worked it all out from these pages when we did it.

 

I suppose the bottom line is don't listen to hearsay and try and get all the hard facts yourself.

 

Indeed. But, is the capital gain based on the difference between the current value and the value at the time the individual leaves the UK or the original purchase price? In either case I imagine the severe downturn in the market will suppress gains for many.

 

Ross

[Rosshf]

Ah

 

This may help:

 

http://z5.ifrm.com/5900/89/0/p1010639/Tax_FAQs.pdf

 

Ross

[Adjutant]

Ah

 

This may help:

 

http://z5.ifrm.com/5900/89/0/p1010639/Tax_FAQs.pdf

 

Ross

 

Very helpful Ross. Thanks for sharing.

 

I was looking at the section "

What happens if I leave property in the UK?

You may have a liability to capital gains tax in Australia upon its sale - obtaina market valuation of the property at the date of your arrival in Australia. This

valuation will be your cost base for Australian capital gains tax purposes.

We currently cant sell our house and its 10% less than when we bought it. I wonder if we would get a tax refund on the loss ?

(Somehow I dont think it works like that, but I would be interested in anyones experiences)

[Andrew Williams]

Hi

 

(Vijnit, is that you Vijay?)

 

 

Re Capital Gains tax in Australia.

 

There is only capital gains tax to pay if there has been a capital gain in Australian dollars since becoming Australian tax resident and selling the asset (excluding temporary residents).

 

I would suggest that this is very unlikely given both the UK house market situation and the strengthening of the Aussie dollar since then.

 

Even if there were a capital gain it would not necessarily mean being taxed at 50%, there are exemptions that may come into place, for example generally if an asset is held for more than 12 months then a 50% reduction applies on the gain.

 

There may be a capital gains tax to pay in the UK as an investment property but again probably unlikely given the market and also again if there were it is possible to mitigate through certain exemptions etc.

 

 

Just on the point mentioned above regarding income tax.

 

Income tax may be payable in the UK to HMRC if profit is made from rental income and this combined with other income is over the personal allowance.

 

The income will also need to be declared in Australia (if a permanent resident) and will be assessed accordingly however a tax credit should apply if there has been tax already paid in the UK.

 

 

Regards

 

Andy

Edited September 20, 2012 by Andrew Williams

[Andrew Williams]

You pay all your tax in UK while renting anyway our agents did that and we had to fill in all forms through solicitors etc I'm sure there was a huge thread on this on poms in oz not so long ago ... you could also ask on there as its a bigger site

 

Hi

 

If you are not making profit or are making profit but not over the personal allowance you could apply to have the income paid gross.

[liverpoolloo]

Hi

 

If you are not making profit or are making profit but not over the personal allowance you could apply to have the income paid gross.

 

Hi, i am renting my house here in the uk, i don't have a mortgage on the house so i am making a profit but the rent is below my personal allowance so i should not have to pay tax here in the uk, i have informed the tax office i am renting the house but not sure what you mean by applying to have the income paid gross.

[Andrew Williams]

Hi, i am renting my house here in the uk, i don't have a mortgage on the house so i am making a profit but the rent is below my personal allowance so i should not have to pay tax here in the uk, i have informed the tax office i am renting the house but not sure what you mean by applying to have the income paid gross.

 

 

Hi

 

Are you having tax deducted by the Rental Agency from the gross rent?

 

If so and like you say all of your UK income is below the personal allowance hence you should not pay tax you can complete form NRL1 http://www.hmrc.gov.uk/cnr/nrl1.pdf it essentially allows you to receive the rent gross so that tax is not paid along the way and then claimed back from HMRC at the end.

 

It's a bit like registering form R85 to receive interest on savings without having tax withheld by the Bank.

 

Regards

 

Andy