Australian Property and The 6 Year Rule Change takes effect in 2019

[4MyEgo]

This maybe old news for some, but for others, it maybe helpful, as the net is far and wide, if you know anyone who has a rental property in Australia and is a non resident and is under the 6 year rule, you may wish to forward the link to them, or bring it to their attention, because I envisage a fair few hard working Aussie Xpats just trying to do the right thing and survive here in Thailand, will get caught out and have to pay tens of thousands of $'s in the future.

 

So for those fortunate enough to own their principal place of residence and are renting it under "The 6 Year Rule", and who reside here in Thailand or anywhere else on the planet, excluding Australia and are deemed non resident for tax purposes, please read the article below as this will have an impact on Capital Gains Tax payable and will come into affect on 1 July 2019 for those who already own their principal place of residence from my interpretation, so don't get caught with your pants down.

 

https://www.bdo.com.au/en-au/insights/tax/articles/foreign-residents-and-cgt

 

This does not have an effect on Australian residents for tax purposes, but always good to ask your accountant, because the Australian government (both sides) are always looking for ways to slip things through without us being aware.

Edited February 20, 2018 by 4MyEgo

[ncc1701d]

Disaster. How old do you have to be to own property in aus? I’ll just buy in my kids names or never sell I guess

 

thanks for the the heads up though.

Edited February 22, 2018 by ncc1701d

[4MyEgo]

On 22/02/2018 at 4:01 PM, ncc1701d said:

Disaster. How old do you have to be to own property in aus? I’ll just buy in my kids names or never sell I guess

 

thanks for the the heads up though.

If you own a property in Australia, you might find this ATO tool handy:

 

https://www.ato.gov.au/Calculators-and-tools/Capital-gains-tax-property-exemption-tool/

 

As far as I know the legal age for owning property in Australia is 18, although a minor can also own property, i.e. under 18 years of age, but then there are all sorts of tax implications.

 

Never sell is one option as there is no capital gains tax on death providing the property is disposed of within 24 months and you lived in it, if you rented it out for any period it will attract capital gains tax on the sale of the property for that period.

 

https://www.ato.gov.au/General/Capital-gains-tax/Deceased-estates-and-inheritances/Inherited-dwellings/CGT-exemptions-for-inherited-dwellings/#qu6_3

 

 

[ncc1701d]

So... after hunting around the ato tax web site, I finally found what I think is the actual rate - it’s 12.5%. So does this mean as a non resident for tax, if I buy for 1M, sell for 1.5M, I pay 12.5% on 500,000?

 

what if I buy land for $500,000 then put a $500,000 house on the land and then sell everything for 1M?

[ncc1701d]

Might be worth a shot

 

http://www.aussieproperty.com/Competitions/Petition-Against-Removal-Of-Principal-Residence-Exemption-For-Overseas-Expatriates/0b9409d0-d875-4b51-969e-4694716c71eb

[4MyEgo]

On 25/02/2018 at 5:25 PM, ncc1701d said:

So... after hunting around the ato tax web site, I finally found what I think is the actual rate - it’s 12.5%. So does this mean as a non resident for tax, if I buy for 1M, sell for 1.5M, I pay 12.5% on 500,000?

 

what if I buy land for $500,000 then put a $500,000 house on the land and then sell everything for 1M?

I think your confused with the recent amendment to the legislation for foreign resident withholding tax, that is a "minimum" rate which was 10% withholding tax on Australian property up to 2 million dollars, amended from 1 July 2017 to 12.5% on Australian property worth upwards of $750,000, which MUST be held by the Conveyancer or solicitor if you sell a property as a foreign resident, and they must give it to the ATO prior to settlement, and trust me, no Conveyencer or Solicitor is going to let that one slip by because they will be held liable by the ATO, you as a Foreign Resident will have to pay the balance of the Capital Gains Tax when you do your tax return, this was brought in to stop Foreign Residents buying up property, riding the boom, then selling and taking the money without paying any Capital Gains Tax..

 

This is a different topic, its about your principal place of residence, i.e. if you went overseas or moved interstate for example, you could apply for the "6 year rule", i.e. an exemption on paying any Capital Gains Tax if you rented your principal place of residence for those 6 years, its complicated, but the changes do have a grandfathering if it passes legislation, i.e. 

 

The grandfathering rules for any gains on properties that were already owned as at 7:30pm 9 May 2017 and were currently being treated as the owner’s main residence, will continue to be exempt from CGT under the existing provisions until 30 June 2019.

 

However, if the dwelling is sold after 30 June 2019 CGT will be apply in relation to the capital gains accruing after that date, so there is only limited grandfathering relief available.

 

Capital Gains Tax on Australian Property for Foreign Residence makes it not worth buying property, or holding it in Australia, i.e. its 32.5c tax on every $ you earn from the rent, you do not get the usual $18,200 threshold that Australians get before they start paying tax, you also pay Land Tax every year starting at $350,000, and there is also a 2% levy in NSW on top of that, but varies from state to state: http://www.revenue.nsw.gov.au/taxes/land-tax-surcharge and its changing all the time, so I try to keep abreast of it all, now as far as Capital Gains Tax goes on the property owned by Foreign Residents, put it this way, I sold as soon as my time was up and I became a Foreign Resident, because when you add all the other costs, like water and council rates, insurance, strata levies if its a unit/villa/townhouse, agents commission for collecting the rent, re-letting fees, advertising, vacancy factors if any, your probably left with 40% providing you don't have to fork out for any maintenance/repairs or special levy if strata title.

 

If you retain your Australian Residency you get a discount of 50% for keeping it as an investment for more than 12 months, but as a Foreign Resident, your toast.

 

See the link below and throw it into warp speed and stay away from Australian property as a Foreign Resident:

 

https://www.ato.gov.au/general/capital-gains-tax/international-issues/cgt-discount-for-foreign-resident-individuals/

Edited March 3, 2018 by 4MyEgo

[ncc1701d]

I most certainly am confused. I have been out of Australia since I was 11 and don’t have any property there, am not a resident in aus for tax purposes, but just recently thinking about getting some. I wouldn’t be renting it out, just using when I go back to see my kids. I have no intentions of becoming a resident of Australia again. Ever. So the only question is what happens when I move to greener pastures, will my kids have to pay some sort of inheritance tax. I know aus doesn’t have a death tax, but I think on foreign owned property they will take something when the title is transferred.

 

sounds too hard and, as you say, stay away from buying property in aus.

[4MyEgo]

On 04/03/2018 at 12:26 AM, ncc1701d said:

I most certainly am confused. I have been out of Australia since I was 11 and don’t have any property there, am not a resident in aus for tax purposes, but just recently thinking about getting some. I wouldn’t be renting it out, just using when I go back to see my kids. I have no intentions of becoming a resident of Australia again. Ever. So the only question is what happens when I move to greener pastures, will my kids have to pay some sort of inheritance tax. I know aus doesn’t have a death tax, but I think on foreign owned property they will take something when the title is transferred.

 

sounds too hard and, as you say, stay away from buying property in aus.

To be honest, it wouldn't be feasible for you to buy, as you confirmed in your last sentence.

 

The capital gains tax, annual land tax, holding costs, i.e. council and water rates, insurance, maintenance, with no income would mean you would be running at a loss, suffice to say, just rent a place through either Air B&B or other sites for the duration of the time you are there.

 

The government is or has just passed legislation to hit foreign residence with a flat annual rental tax if they leave their properties vacant, just to add to it, but if your still looking to buy, I would say the kids wouldn't be up for future capital gains tax if you did, but they would have more from the bank or stock market if you went that path IMO

Edited March 5, 2018 by 4MyEgo