An Australian trying to retire in Thailand

[yaagjon]

11 minutes ago, 4MyEgo said:

 

You are correct in all the above, unfortunately Centrelink does, as they advised us after being 6 weeks out of the country that Border Control or whatever they call themselves advised them, and as we are absent any payments such as family A & B will cease until we return, I am not entitled to family A & B as I earned too much, so don't know why they had to advise me, probably standard procedure, e.g. on the system, now if they did that, I am sure they advise the ATO ?

 

The only gripe I have is the first financial year that I have to do my tax return being a foreign resident, it goes like this:

 

I worked 5 months, July to November, then I came here and have been here since, so I am over the 183 days, in June I sold a property which was originally purchased as an investment property, then I moved into it, so I have capital gains tax to pay on that on a pro-rata basis, fair enough, what erks me is that I don't believe that I should have to pay 32.5 cents for the first $80,000 then 37.5 cents after that, its a crime, having worked it out, we are talking $15k the difference as a minimum, that's about 400,000 baht or a years survival money here, for what being a foreign resident 7 months, just over the 183 days.

 

Not fair, if anyone can tell me different it would be appreciated.

You probably need to add the 2% medicare levy to those tax rates, unless you can get an exemption certificate.

[yaagjon]

12 minutes ago, Peterw42 said:

 

Careing for a sick spouse or family member would probably be accepted by ATO as a reason you dont reside in Australia. And retain resident status. 

I wouldn't think so. It's more to do where your "home" is. You can spend 5 years traveling overseas but if your "home" is Australia then you will be ok.

It's really very simple, it just requires thinking outside of the square.

[4MyEgo]

1 hour ago, Peterw42 said:

 

Careing for a sick spouse or family member would probably be accepted by ATO as a reason you dont reside in Australia. And retain resident status. 

 

That's creative, thank you Pete, will take that one on board, wouldn't be hard to get a letter from a doctor over here stating that my wife's mother, or father or water buffalo have been ill and require full time care, that's more bait.

[4MyEgo]

1 hour ago, yaagjon said:

I wouldn't think so. It's more to do where your "home" is. You can spend 5 years traveling overseas but if your "home" is Australia then you will be ok.

It's really very simple, it just requires thinking outside of the square.

 

I like your positive approach, wish it was that simple, travelling in more than one country would work, not if your passport shows Thailand only, but one will give it a go and if the shit hits the fan, one will just have to make sure no $'s are left in the country for them to freeze accounts for the difference between Aus Vs Non resident tax.

[Bob9]

3 hours ago, 4MyEgo said:

 

You are correct in all the above, unfortunately Centrelink does, as they advised us after being 6 weeks out of the country that Border Control or whatever they call themselves advised them, and as we are absent any payments such as family A & B will cease until we return, I am not entitled to family A & B as I earned too much, so don't know why they had to advise me, probably standard procedure, e.g. on the system, now if they did that, I am sure they advise the ATO ?

 

The only gripe I have is the first financial year that I have to do my tax return being a foreign resident, it goes like this:

 

I worked 5 months, July to November, then I came here and have been here since, so I am over the 183 days, in June I sold a property which was originally purchased as an investment property, then I moved into it, so I have capital gains tax to pay on that on a pro-rata basis, fair enough, what erks me is that I don't believe that I should have to pay 32.5 cents for the first $80,000 then 37.5 cents after that, its a crime, having worked it out, we are talking $15k the difference as a minimum, that's about 400,000 baht or a years survival money here, for what being a foreign resident 7 months, just over the 183 days.

 

Not fair, if anyone can tell me different it would be appreciated.

 

I can confirm that anyone leaving (and entering) Australia is advised to the relevent authorities. One of the family tax payments was not income/assets tested, and so you would be in the system. CLink is entitled to know if any person leaves the country that is receiving welfare payments. ATO is entitled to know if you lodge a tax return. etc etc etc. Best to assume that 'they' all know.

 

As I said before, it is a matter of where you reside - not where you currently live. If you reside in Australia (at your Mothers) and can prove that through things such as licence, mail, voting, bank accounts, and people can verify that (Mother/Friends etc) then you are still a resident of Australia and can lodge your tax return on that basis. If the ATO decides to audit you and puts iot forward that you are not a resident - you provide all the 'proof' and reasons why you believed that you are a resident.  If they reject that, then you admit your mistake, say you got bad advice (some bloke called Bob you met), then apologise and pay the full tax amount. 

 

If you agree/believe that you are still a resident (now), then you can lodghe the xcurrent tax return on that basis.  Certainly at some time in the future (who knows when but probably next year) you could decide after having given it a trial run for 6-12 months, that you want to live in Thailand permanently - and are therefore no longer a resident for tax purposes.  But I would travel back a few times before making that decison (family/friends etc), and make sure you keep your auditable 'trail' to back up your position and why you decided you were still a resident in 2016. I would use the same system I have always used to lodge this tax return (self or agent - paper or on-line etc etc).  After returning home next year and telling everyone (family/friends) your decision, I would also 'declare' to ATO and CLink and AEC and anyone else, that that you have decided to live in Thailand full-time.  Worth $15K? Up to you

 

 

 

 

[4MyEgo]

10 hours ago, Bob9 said:

 

I can confirm that anyone leaving (and entering) Australia is advised to the relevent authorities. One of the family tax payments was not income/assets tested, and so you would be in the system. CLink is entitled to know if any person leaves the country that is receiving welfare payments. ATO is entitled to know if you lodge a tax return. etc etc etc. Best to assume that 'they' all know.

 

As I said before, it is a matter of where you reside - not where you currently live. If you reside in Australia (at your Mothers) and can prove that through things such as licence, mail, voting, bank accounts, and people can verify that (Mother/Friends etc) then you are still a resident of Australia and can lodge your tax return on that basis. If the ATO decides to audit you and puts iot forward that you are not a resident - you provide all the 'proof' and reasons why you believed that you are a resident.  If they reject that, then you admit your mistake, say you got bad advice (some bloke called Bob you met), then apologise and pay the full tax amount. 

 

If you agree/believe that you are still a resident (now), then you can lodghe the xcurrent tax return on that basis.  Certainly at some time in the future (who knows when but probably next year) you could decide after having given it a trial run for 6-12 months, that you want to live in Thailand permanently - and are therefore no longer a resident for tax purposes.  But I would travel back a few times before making that decison (family/friends etc), and make sure you keep your auditable 'trail' to back up your position and why you decided you were still a resident in 2016. I would use the same system I have always used to lodge this tax return (self or agent - paper or on-line etc etc).  After returning home next year and telling everyone (family/friends) your decision, I would also 'declare' to ATO and CLink and AEC and anyone else, that that you have decided to live in Thailand full-time.  Worth $15K? Up to you

 

 

 

 

 

Bob, your advice is brilliant, and worth giving it a go.

 

Thanks for your time and advice, greatly appreciated, champion ! ! ! ! 

[BaiLao]

Can anyone recommend a lawyer/accountant etc. - either within Australia or overseas - that is able to offer up do date advice and assistance with all these issues and perhaps act on my behalf if necessary?  A little voice is telling me not to make a Centrelink 'financial advisor' my first and only point of reference.

[louse1953]

18 hours ago, 4MyEgo said:

 

I learn't a very very long time ago from my late brother, God rest his soul, that you NEVER admit, for whatever reason when it comes to authority, so we will have to say that I never intended to stay, I had a return ticket, but didn't return because I didn't want to go back without the kids, you see Mr ATO my wife and I agreed to separate with me coming back to Australia, but I couldn't do it.

 

Whether they take the bait or not is worth a shot, because giving them the extra $'s is a crime, I am all for paying tax as an Australian resident, don't get me wrong, but not as a foreign resident, especially when I hear that if a Muslim (nothing against the race), has 4 wives under Sharia Law, all of his wives are entitled to Centrelink payments including all the kids from the 4 wives, somebody please make sense of this for me FCOFL

Muslim is not a race and i would like to see a link to what you say about 4 wives.Sounds like an urban myth to me.The"wives"could be on unemployment benefits and the children get support as well.You can live with as many women/men as you like but only one can be your wife.Sharia law does not trump Australian law,not yet anyway.

Don't tell Pauline,she'd have a heart attack.

Edited August 31, 2016 by louse1953

[tharae]

18 hours ago, Bob9 said:

Judging by your story - there is a way forward. But firstly lets talk about what is taxed and how it is taxed when you are a non-resident (for tax purposed). As far as I am aware (99.999% sure) you are not taxed on Super payments received, nor on any Super withdrawals (post 60), nor withdrawals from bank accounts etc., and not on interest earned in Super accounts (I bet they change that one day).

 

What you are taxed on is any income earned in Australia (not what earned overseas) -  interest earned (eg bank accounts), rental monies (net), dividends (not franked),  salaries/payments, etc. You are not taxed on Govt pensions and super account pensions/payments and franked dividends (or any other tax-free payments) - but keep in mind that if you are a resident for tax purposes, they are added to your income for the 18K threshold. 

 

How you are taxed as a non-resident is at the marginal rate (32.5%) on EVERY dollar of income earned in Australia. There is no threshold for a non-resident.  I know of one bloke that was earning money from renting out his home while overseas (and interest in an investment account), and was declared a non-resident after review, and had a back tax bill of $62K. Because his assets were in Australia he had no chance to do a runner - he had to go back to Aust and pay off the tax bill (and re-organise his finances). 

 

So the issue is - do you really want to be a resident for tax purposes?? It doesn't mean much for getting approved for the age pension (CLink use their own method). If you answered yes because you are earning income that is taxable in Australia, then the first question I would ask is :  Does the Aust Govt or anyone else (besides Mother) know that you have a wife and kids and live here?

 

 

If you are classed as a non-resident for tax purposes then you are taxed (32.5%) for any withdrawals from a super fund.  The way around this, in the case of an SMSF, is to ensure at least 50% of the directors of the fund are resident in Australia (family member or trusted friend/advisor).

 

[louse1953]

18 hours ago, 4MyEgo said:

 

You are correct in all the above, unfortunately Centrelink does, as they advised us after being 6 weeks out of the country that Border Control or whatever they call themselves advised them, and as we are absent any payments such as family A & B will cease until we return, I am not entitled to family A & B as I earned too much, so don't know why they had to advise me, probably standard procedure, e.g. on the system, now if they did that, I am sure they advise the ATO ?

 

The only gripe I have is the first financial year that I have to do my tax return being a foreign resident, it goes like this:

 

I worked 5 months, July to November, then I came here and have been here since, so I am over the 183 days, in June I sold a property which was originally purchased as an investment property, then I moved into it, so I have capital gains tax to pay on that on a pro-rata basis, fair enough, what erks me is that I don't believe that I should have to pay 32.5 cents for the first $80,000 then 37.5 cents after that, its a crime, having worked it out, we are talking $15k the difference as a minimum, that's about 400,000 baht or a years survival money here, for what being a foreign resident 7 months, just over the 183 days.

 

Not fair, if anyone can tell me different it would be appreciated.

Well i can tell you to check your maths,July-Nov adds up to 153 days.About your capital gains problem,i would be appealing that.This new  law was bought in to tax the millionaire Chinese buying up in Sydney and putting their kids in the homes while they were studying. The intent of the law was not to catch Ozzys out,who already have paid a lot of tax.

[4MyEgo]

1 hour ago, louse1953 said:

Well i can tell you to check your maths,July-Nov adds up to 153 days.About your capital gains problem,i would be appealing that.This new  law was bought in to tax the millionaire Chinese buying up in Sydney and putting their kids in the homes while they were studying. The intent of the law was not to catch Ozzys out,who already have paid a lot of tax.

 

Hey Louis, the math is correct, I was in Australia for the time you calculated, e.g. 153 days, the balance was in Thailand, e.g. 213 days if my maths is correct, sounds like a leap year too ?

 

So the 183 day rule applies as does the capital gains tax as the property was originally purchased as an investment, then I moved in later, so it will be on a pro-rata basis, however I will do my tax return as a resident, pay my working tax and capital gains tax as a resident, and if they raise its head, I will try and give them the sob story, if that fails, give them the balance, shit happens, and life goes on, I just want to ride anything of authority in Australia, they are like a cancer !

[Bob9]

5 hours ago, tharae said:

If you are classed as a non-resident for tax purposes then you are taxed (32.5%) for any withdrawals from a super fund.  The way around this, in the case of an SMSF, is to ensure at least 50% of the directors of the fund are resident in Australia (family member or trusted friend/advisor).

 

Sorry, but that is not always the case - 90% of the time it is not taxable at all.  But you are right in that it 'can' be the case.  It all depends on your Super arrangement, and contribution methods, and your preservation age, and how old you are etc etc. This link to ATO details the issues - https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-paying-tax/Withdrawing-your-super-and-paying-tax/?page=3#How_tax_applies_to_your_super

For myself, and the vast majority of PAYE Super arrangements , the Super withdrawn is not taxable.  I think that for SMSFs you may be right. 

[Bob9]

6 hours ago, BaiLao said:

Can anyone recommend a lawyer/accountant etc. - either within Australia or overseas - that is able to offer up do date advice and assistance with all these issues and perhaps act on my behalf if necessary?  A little voice is telling me not to make a Centrelink 'financial advisor' my first and only point of reference.

Unfortunately, there are no 'professional agents' who can provide CLink related advice. There are ATO (Tax) professionals, and some of them know CLink rules/regs reasonably well, but I couldn't recommend anyone really. I did my own reseach/study, after paying two 'professionals' money and getting stuff all advice, and heavily caveated at that. If there is something that you need to get advice on quickly, then I would try to contact a Financial Adviser/Planner that is also a qualified Tax Accountant  (I couldnt find a good one) - maybe check out the Financial Planning Associations. If you have the time I would do your own research before seeking professional advice - the more you know and prepare, the less they will charge.

 

[louse1953]

6 hours ago, tharae said:

If you are classed as a non-resident for tax purposes then you are taxed (32.5%) for any withdrawals from a super fund.  The way around this, in the case of an SMSF, is to ensure at least 50% of the directors of the fund are resident in Australia (family member or trusted friend/advisor).

 

Well my situation is i am in an industry fund and am over 60,so every withdrawal is tax free.Just got my yearly tax free top up last week.You must be talking about self managed fund.I am a wrongly accused non resident.Thanks to Bob and Pete this travesty of justice should be rectified.

[tharae]

15 hours ago, Bob9 said:

Sorry, but that is not always the case - 90% of the time it is not taxable at all.  But you are right in that it 'can' be the case.  It all depends on your Super arrangement, and contribution methods, and your preservation age, and how old you are etc etc. This link to ATO details the issues - https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-paying-tax/Withdrawing-your-super-and-paying-tax/?page=3#How_tax_applies_to_your_super

For myself, and the vast majority of PAYE Super arrangements , the Super withdrawn is not taxable.  I think that for SMSFs you may be right. 

 

The application of tax free withdrawals on Super  (whatever the arrangement) is predicated on being a resident for tax purposes. As a non-resident (for tax purposes) all withdrawals are taxed at 32.5%.  Check with  your accountant if you're unsure.  Don't get caught out.

 

[Bob9]

6 hours ago, tharae said:

 

The application of tax free withdrawals on Super  (whatever the arrangement) is predicated on being a resident for tax purposes. As a non-resident (for tax purposes) all withdrawals are taxed at 32.5%.  Check with  your accountant if you're unsure.  Don't get caught out.

 

Wrong. " If you are an Australian citizen or permanent resident heading overseas, your super remains subject to the same rules, even if you are leaving Australia permanently." ATO!!!

 

I will give you the benefit of the doubt and assume you genuinely though that was the case. Perhaps you confused the tax requirements on Super withdrawals that applies to non-residents, that previously worked in Australia and accumulated Super - but even then DASP applies to them and not the non-resident tax rate on income.  But I would request you double-check before making such broad statements about Tax issues in a public forum - some people may have thought you are correct.  

[yaagjon]

32 minutes ago, Bob9 said:

Wrong. " If you are an Australian citizen or permanent resident heading overseas, your super remains subject to the same rules, even if you are leaving Australia permanently." ATO!!!

 

I will give you the benefit of the doubt and assume you genuinely though that was the case. Perhaps you confused the tax requirements on Super withdrawals that applies to non-residents, that previously worked in Australia and accumulated Super - but even then DASP applies to them and not the non-resident tax rate on income.  But I would request you double-check before making such broad statements about Tax issues in a public forum - some people may have thought you are correct.  

He is writing about a non tax resident over 60 withdrawing Super. Your statement lifted from the ATO is about a citizen or permanent resident taking their Super and then heading overseas.  Two different scenarios I would have thought.

[Bob9]

4 hours ago, yaagjon said:

He is writing about a non tax resident over 60 withdrawing Super. Your statement lifted from the ATO is about a citizen or permanent resident taking their Super and then heading overseas.  Two different scenarios I would have thought.

 

He stated that not being taxed on Super withdrawals requires you to 'be a resident for tax purposes' which is wrong. It doesn't matter if you are a resident for tax, or a non-resident for tax, Super withdrawals when you are overseas are not taxed any different than they would otherwise be taxed (which for 90% of us is zero).  If you are an Australian (citizen or permanent resident) heading overseas, your super remains subject to the same rules, even if you are leaving Australia permanently.  If you leave Australia permanently, you will become a non-resident for tax purposes, but your tax requirements for Super withdrawals do not change.  

[tharae]

14 hours ago, Bob9 said:

Wrong. " If you are an Australian citizen or permanent resident heading overseas, your super remains subject to the same rules, even if you are leaving Australia permanently." ATO!!!

 

I will give you the benefit of the doubt and assume you genuinely though that was the case. Perhaps you confused the tax requirements on Super withdrawals that applies to non-residents, that previously worked in Australia and accumulated Super - but even then DASP applies to them and not the non-resident tax rate on income.  But I would request you double-check before making such broad statements about Tax issues in a public forum - some people may have thought you are correct.  

I wouldn't be making this sort of statement without advice from my tax accountant and my Super Fund Administrator.  The danger is that people will assume they are able to withdraw super as a non-resident for tax purposes and no pay tax from the first $.  That's all OK if the ATO doesn't catch up with you. If they do, you're in for significant back taxes. Note, the tax free threshold does not apply as a non-resident for tax purposes.   

[Bob9]

3 hours ago, tharae said:

I wouldn't be making this sort of statement without advice from my tax accountant and my Super Fund Administrator.  The danger is that people will assume they are able to withdraw super as a non-resident for tax purposes and no pay tax from the first $.  That's all OK if the ATO doesn't catch up with you. If they do, you're in for significant back taxes. Note, the tax free threshold does not apply as a non-resident for tax purposes.   

 

tharae - please send me the name/contact details of your tax accountant and fund administrator, and if you have it the 'advice' they gave you (email? letter? statement?) - send a PM if you want.  This is a serious issue - there are thousands of Aussies overseas drawing down on their Super.

 

I am certain you are wrong - perhaps you personally are in a situation that makes you incur tax on Super (SMSF?).

Either way, you are also clearly certain you are right - so I am going to investigate the advice you got that said you will incur tax on your withdrawals, and my previous advice that I will not.

[tharae]

47 minutes ago, Bob9 said:

 

tharae - please send me the name/contact details of your tax accountant and fund administrator, and if you have it the 'advice' they gave you (email? letter? statement?) - send a PM if you want.  This is a serious issue - there are thousands of Aussies overseas drawing down on their Super.

 

I am certain you are wrong - perhaps you personally are in a situation that makes you incur tax on Super (SMSF?).

Either way, you are also clearly certain you are right - so I am going to investigate the advice you got that said you will incur tax on your withdrawals, and my previous advice that I will not.

 

Bob9 - my fund manager is a well known fund "Advisor" based in Sydney, with offices in Melbourne, Canberra, Brisbane and New York.

 

The Tax Accountant simply advises whether you are a resident or non-resident for tax purposes. As you have noted this can be self assessed by accessing the ATO website and answering a series of questions.

 

My Fund as advised me to take necessary steps to ensure the fund is managed onshore.  This mitigates/extinguishes any risk of the ATO deciding that the SMSF does not qualify for tax free withdrawals. As I have noted from the outset this is in relation to SMSFs. Remember, the ATO is the key regulator of SMSFs. It is up to individuals to do their own diligence in this area.

[Bob9]

1 hour ago, tharae said:

 

Bob9 - my fund manager is a well known fund "Advisor" based in Sydney, with offices in Melbourne, Canberra, Brisbane and New York.

 

The Tax Accountant simply advises whether you are a resident or non-resident for tax purposes. As you have noted this can be self assessed by accessing the ATO website and answering a series of questions.

 

My Fund as advised me to take necessary steps to ensure the fund is managed onshore.  This mitigates/extinguishes any risk of the ATO deciding that the SMSF does not qualify for tax free withdrawals. As I have noted from the outset this is in relation to SMSFs. Remember, the ATO is the key regulator of SMSFs. It is up to individuals to do their own diligence in this area.

 

Thanks tharae - clearly I missed the point that your were talking about a SMSF - in which case being a non-resident for tax purposes will create tax issues for withdrawals, and for interest earned on the money in the fund.

 

However, I am talking about 'normal' Super arrangements for normal Australian PAYE earners in a normal Super Fund (not an SMSF) - in which case it is irrelevant if you are a resident for tax purposes or a non-resident for tax purposes - it doesn't matter whether you are overseas or not.  

 

Please note everyone:  A resident (and non-resident) for tax purposes and being a citizen/resident of Australia are two different things.  You can be a citizen/resident of Australia,  but if you live overseas and no longer 'reside' in Australia then you are a non-resident for tax purposes (they should use a different term). If you fit into that category (as a non-resident for tax) then you can earn salary/income overseas and not be required to pay tax in Australia.  But what it also means (as a non-resident for tax) is that if you earn taxable income in Australia (interest/rent/etc) then you are required to pay tax at the non-resident tax rate (no tax free threshold). 

 

For anyone confused about tax payable on their Super withdrawals while overseas, then you should also seek advice from an Australia tax accountant for your particular circumstances. Both tharae and I have different situations - and we have both therefore received different advice.

 

[tharae]

On 02/09/2016 at 3:17 PM, Bob9 said:

 

Thanks tharae - clearly I missed the point that your were talking about a SMSF - in which case being a non-resident for tax purposes will create tax issues for withdrawals, and for interest earned on the money in the fund.

 

However, I am talking about 'normal' Super arrangements for normal Australian PAYE earners in a normal Super Fund (not an SMSF) - in which case it is irrelevant if you are a resident for tax purposes or a non-resident for tax purposes - it doesn't matter whether you are overseas or not.  

 

Please note everyone:  A resident (and non-resident) for tax purposes and being a citizen/resident of Australia are two different things.  You can be a citizen/resident of Australia,  but if you live overseas and no longer 'reside' in Australia then you are a non-resident for tax purposes (they should use a different term). If you fit into that category (as a non-resident for tax) then you can earn salary/income overseas and not be required to pay tax in Australia.  But what it also means (as a non-resident for tax) is that if you earn taxable income in Australia (interest/rent/etc) then you are required to pay tax at the non-resident tax rate (no tax free threshold). 

 

For anyone confused about tax payable on their Super withdrawals while overseas, then you should also seek advice from an Australia tax accountant for your particular circumstances. Both tharae and I have different situations - and we have both therefore received different advice.

 

Interested readers should also note that it is not possible to make (additional) contributions to a SMSF when classified as a non-resident.   

[Youbloodybeauty]

On 30/08/2016 at 10:13 PM, 4MyEgo said:

I worked 5 months, July to November, then I came here and have been here since, so I am over the 183 days, in June I sold a property which was originally purchased as an investment property, then I moved into it, so I have capital gains tax to pay

 

How long ago was that you rented then moved into it?
I bought our place in the mid 90's and rented it (claimed interest etc) for 6 months before moving in and lived there since ie: permanent residence.

Hoping all ATO records of that first renting are long since gone, although I've kept all tax info about it.

I'd like to rent it out again while staying in Thailand and understand there is a 6 year period before CGT steps in.

[4MyEgo]

2 hours ago, Youbloodybeauty said:

 

How long ago was that you rented then moved into it?
I bought our place in the mid 90's and rented it (claimed interest etc) for 6 months before moving in and lived there since ie: permanent residence.

Hoping all ATO records of that first renting are long since gone, although I've kept all tax info about it.

I'd like to rent it out again while staying in Thailand and understand there is a 6 year period before CGT steps in.

 

I don't want to burst your bubble, but be very very careful with the ATO, they are linked to every government body there is, e.g. I have a mate on the inside and he has said, if we ever audit someone, all we do is put their name on the screen and if it lights up, e.g. from the Rental Bond Bond, we will ask the RBB to advise the date the bond was lodged and released, then we will provide the address to, for example:  Telstra, Energy Australia, AGL, ect, and will request the names the accounts were in, and from what period/s, those were his exact words, and on top of that he said, once we establish that you have tried to avoid paying tax and or capital gains tax, we will audit you, fine you and also receive everything owing to us, then you will have to put up with us for years, as we will be watching you and or auditing you, if required, so it isn't worth the hassle.

 

To answer your question: I purchased the place in either June or July 2013 and rented it till August the following year, so I qualified for the 50% CGT discount, e.g. you have to lease it for 12 months to be able to claim the CGT discount. I then renovated it over a 6 week period and then moved in from October 2014 till November 2015 when I moved to Thailand, then I rented it from November 2015 to June 2016 when I sold it, so it had to be calculated on a prorata bases, e.g. how long I rented it Vs how long I lived in it.

 

I have since done my tax return after I last posted and it wasn't that bad, because there are a lot of deductions I could claim, e.g. of the $245,000 gross profit in the 3 years since I purchased the property, 50% came straight off, the accountant took out the stamp duty, solicitor (buying/selling), agents fee, advertising costs and the capital expenditure (renovation costs), I ended up paying about $23,640 with 5 months worth of income tax that I didn't pay and 7 months of rental received while I was here. I also received a prorata entitlement on the $18,200 threshold which took about another $15,437, and the difference between retaining my Australian Residency Vs becoming a Non Resident tax wise, was minimal, around $4,000 extra in tax. 

 

Now to be honest, as I am too far away from getting the pension, (10 years), and the fact that I won't return to Australia for 2 years prior to the old age pension age to try and qualify to get it, e.g. its not feasible. I lose nothing from declaring myself as a non-resident, all I lose is Medicare, unless I return for 6 months and apply to be reinstated, and lose my right to vote.

 

As a non resident I don not have to lodge tax returns, as the banks withhold 10% on any interest bearing accounts that I have and forward that to the ATO, I pay no tax on shares (fully franked, tax already paid), and no capital gains tax on the shares when and if I sell them.

 

Unfortunately for anyone who purchases a property and doesn't move into it and leases it, loses any right to apply for the 6 year rule which is free of any capital gains tax, so that is out the window for you.

 

What you have to do is keep all of your records and come clean when the time comes, as a retired property valuer, I would be talking to your accountant and ask him if it is best that you get a retrospective (back dated) property valuation as at the date you moved into the property as that will set a basis for value, e.g. what if any increase the property had in those 6 months, suffice to say if you get a real valuer, one with a personality, it shouldn't be to hard to tweak things as it was only 6 months from the day you purchased it.

 

I would also ask the accountant if you should get another valuation as at the date you intend to lease the property out again, however I doubt you will require a valuation on both occasions as they will apply the prorata basis rule, e.g. if you owned it for 3 years and you lived in it for 2 you will pay 1/3 of its capital gains in tax, less stamp duty, agents, advertising costs, solicitors buying/selling costs, etc etc, you will miss out on not paying capital gains as you need to lease it for more than 12 months.

 

Do yourself a favour, talk to an accountant, play with some numbers before you decide to lease it out again, and if you plan on moving to Thailand and fall under the non resident rule, you will be toast, e.g. 32.5% of the rent will be tax, and all capital gains will go straight to the tax man from the date you depart, you never know it might pay for you to sell up, either way, start your research, I did months worth.

 

If you need more information or non legal/binding advice message me.

 

Good luck

[yaagjon]

On ‎12‎/‎10‎/‎2016 at 2:25 PM, 4MyEgo said:

 

I don't want to burst your bubble, but be very very careful with the ATO, they are linked to every government body there is, e.g. I have a mate on the inside and he has said, if we ever audit someone, all we do is put their name on the screen and if it lights up, e.g. from the Rental Bond Bond, we will ask the RBB to advise the date the bond was lodged and released, then we will provide the address to, for example:  Telstra, Energy Australia, AGL, ect, and will request the names the accounts were in, and from what period/s, those were his exact words, and on top of that he said, once we establish that you have tried to avoid paying tax and or capital gains tax, we will audit you, fine you and also receive everything owing to us, then you will have to put up with us for years, as we will be watching you and or auditing you, if required, so it isn't worth the hassle.

 

To answer your question: I purchased the place in either June or July 2013 and rented it till August the following year, so I qualified for the 50% CGT discount, e.g. you have to lease it for 12 months to be able to claim the CGT discount. I then renovated it over a 6 week period and then moved in from October 2014 till November 2015 when I moved to Thailand, then I rented it from November 2015 to June 2016 when I sold it, so it had to be calculated on a prorata bases, e.g. how long I rented it Vs how long I lived in it.

 

I have since done my tax return after I last posted and it wasn't that bad, because there are a lot of deductions I could claim, e.g. of the $245,000 gross profit in the 3 years since I purchased the property, 50% came straight off, the accountant took out the stamp duty, solicitor (buying/selling), agents fee, advertising costs and the capital expenditure (renovation costs), I ended up paying about $23,640 with 5 months worth of income tax that I didn't pay and 7 months of rental received while I was here. I also received a prorata entitlement on the $18,200 threshold which took about another $15,437, and the difference between retaining my Australian Residency Vs becoming a Non Resident tax wise, was minimal, around $4,000 extra in tax. 

 

Now to be honest, as I am too far away from getting the pension, (10 years), and the fact that I won't return to Australia for 2 years prior to the old age pension age to try and qualify to get it, e.g. its not feasible. I lose nothing from declaring myself as a non-resident, all I lose is Medicare, unless I return for 6 months and apply to be reinstated, and lose my right to vote.

 

As a non resident I don not have to lodge tax returns, as the banks withhold 10% on any interest bearing accounts that I have and forward that to the ATO, I pay no tax on shares (fully franked, tax already paid), and no capital gains tax on the shares when and if I sell them.

 

Unfortunately for anyone who purchases a property and doesn't move into it and leases it, loses any right to apply for the 6 year rule which is free of any capital gains tax, so that is out the window for you.

 

What you have to do is keep all of your records and come clean when the time comes, as a retired property valuer, I would be talking to your accountant and ask him if it is best that you get a retrospective (back dated) property valuation as at the date you moved into the property as that will set a basis for value, e.g. what if any increase the property had in those 6 months, suffice to say if you get a real valuer, one with a personality, it shouldn't be to hard to tweak things as it was only 6 months from the day you purchased it.

 

I would also ask the accountant if you should get another valuation as at the date you intend to lease the property out again, however I doubt you will require a valuation on both occasions as they will apply the prorata basis rule, e.g. if you owned it for 3 years and you lived in it for 2 you will pay 1/3 of its capital gains in tax, less stamp duty, agents, advertising costs, solicitors buying/selling costs, etc etc, you will miss out on not paying capital gains as you need to lease it for more than 12 months.

 

Do yourself a favour, talk to an accountant, play with some numbers before you decide to lease it out again, and if you plan on moving to Thailand and fall under the non resident rule, you will be toast, e.g. 32.5% of the rent will be tax, and all capital gains will go straight to the tax man from the date you depart, you never know it might pay for you to sell up, either way, start your research, I did months worth.

 

If you need more information or non legal/binding advice message me.

 

Good luck

You have to own the asset for over 12 months to qualify for the 50% discount. House or shares. Having a 12 month lease is irrelevant.

[4MyEgo]

 

20 minutes ago, yaagjon said:

You have to own the asset for over 12 months to qualify for the 50% discount. House or shares. Having a 12 month lease is irrelevant.

 

I thought that I said that:  "To answer your question: I purchased the place in either June or July 2013 and rented it till August the following year, so I qualified for the 50% CGT discount, e.g. you have to lease it for 12 months to be able to claim the CGT discount. I then renovated it over a 6 week period and then moved in from October 2014 till November 2015 when I moved to Thailand, then I rented it from November 2015 to June 2016 when I sold it, so it had to be calculated on a prorata bases, e.g. how long I rented it Vs how long I lived in it".

 

Please explain your version, e.g. I believe If you lease it for 12 months, you are naturally the owner.  The 12 month period is counted from date of exchange, not settlement as far as the ATO advises.

 

"I would also ask the accountant if you should get another valuation as at the date you intend to lease the property out again, however I doubt you will require a valuation on both occasions as they will apply the prorata basis rule, e.g. if you owned it for 3 years and you lived in it for 2 you will pay 1/3 of its capital gains in tax, less stamp duty, agents, advertising costs, solicitors buying/selling costs, etc etc, you will miss out on not paying capital gains as you need to lease it for more than 12 months".

 

I do believe my last paragraph just above should have said: you will miss out on claiming the 50% CGT discount as you need to lease it out for more than 12 months.

 

 

Edited October 13, 2016 by 4MyEgo

[shadmo63]

I have a question on the 2 year rule for pension portability. If I work in Australia for the final 2 years before hitting retirement/pension age (67 for me), do I qualify for portability straight away? 

[Rancid]

It is the people and the land that makes Australia a great place, the only downside is the government/bureaucracy. That 2 year in Oz rule has been in place for while, and as I have previous posted I believe it is better to be planning a pension free retirement. One way or another a pension will be harder to get, whether less money, higher ages to qualify or having to permanently reside in Oz.

 

Obviously that is harder to do for some, however if still young enough to plan then that should be your goal. In the event that I'm wrong and the pension is obtainable, the worse that could happen is that you'll have more income and an easier life.

[yaagjon]

17 hours ago, 4MyEgo said:

 

 

I thought that I said that:  "To answer your question: I purchased the place in either June or July 2013 and rented it till August the following year, so I qualified for the 50% CGT discount, e.g. you have to lease it for 12 months to be able to claim the CGT discount. I then renovated it over a 6 week period and then moved in from October 2014 till November 2015 when I moved to Thailand, then I rented it from November 2015 to June 2016 when I sold it, so it had to be calculated on a prorata bases, e.g. how long I rented it Vs how long I lived in it".

 

Please explain your version, e.g. I believe If you lease it for 12 months, you are naturally the owner.  The 12 month period is counted from date of exchange, not settlement as far as the ATO advises.

 

"I would also ask the accountant if you should get another valuation as at the date you intend to lease the property out again, however I doubt you will require a valuation on both occasions as they will apply the prorata basis rule, e.g. if you owned it for 3 years and you lived in it for 2 you will pay 1/3 of its capital gains in tax, less stamp duty, agents, advertising costs, solicitors buying/selling costs, etc etc, you will miss out on not paying capital gains as you need to lease it for more than 12 months".

 

I do believe my last paragraph just above should have said: you will miss out on claiming the 50% CGT discount as you need to lease it out for more than 12 months.

 

 

I don't want to sound pedantic, but the reason you qualify for the 50% discount is because you owned the asset for over 12 months. If it was empty it would have made no difference.