Capital gains tax.

Hi there

Just wanted to see if the online Calc was correct. I own a property in the UK which i am considering selling. I bought it in 2003 and lived in it until 2012. I rented it from July 2012 and am now thinking of selling it.

Purchase price was £123000.
Expected sale price is £185000
Exchange rate is around $2.05 today.
I earn around $180k payg income so i am in a high tax band.

The online tool says i will have about $100k profit and will have to pay $24k in cgt.

Does this sounds accurate. I'm not looking for exact figures in just seeing if selling this property would get us to where we want to be regarding deposits for moving forward.

Thank you in advance.

Paul

 

Are you liable for cgt in the UK or Oz?

Best to speak with an accountant who is a UK expat.

 

Sounds like it may have been your main residence till 2012. If you are not claiming another residence during this period then your calculations can be reduced by claiming the 6 year absence rule.

Cost base would be value as of when you moved out in july 2012.

Therefore you CGT may be bugger all.

This is from an Australian tax perspective.

 

Hi Terry. Correct it was my main and only property until this year when i bought in Oz for the first time. Rented since 2012 July though so I've only been away from it 42 months.

So in this instance i need to find out what it was worth in 2012 and see the difference and pay the tax on that? Or are you thinking that i may be exempt completely?

Can anyone recommend an accountant who may know for sure? I should also be able to find out from ATO i guess?

Thank you

 

You can look up the legislation yourself. s118-192(2) ITAA97
INCOME TAX ASSESSMENT ACT 1997 - SECT 118.192 Special rule for first use to produce income

Most tax agents would know this. No real need for a UK knowledgeable one as it is straight forward.

 

Have you always been an Australian tax resident since you acquired the property?

 

Yes

 

How can you reside in UK between date of acquisition 2003 and 2012 and be an Australian tax resident at same time ?? I say its impossible.

The date you became an Australian tax resident is important and needs to be ascertained. Its likely the date you emigrated here or arrived in Au if you had right to reside in Oz already (eg citizenship)

There is a special (the second special rule ) CGT rule for a person who is a tax resident of the UK who later becomes a Oz tax resident.

CGT on foreign residents, temporary residents and changing residency | Australian Taxation Office

The market value at the time you commenced to be a Australian tax resident may well be your cost base. The AUD/UKP exchange rate on that date and the value in UKP would be used to determine the $AUD value of the cost base. I'm often asked why does it mention Australian property ? This special rule has an exception. Australian property is always liable to CGT (or an exemption etc) and the market value wont apply if a Australian leaves Australia and comes back later. Their costs base remains the historical cost etc. The market value rule applies to foreign property and other CGT assets eg share investments.

Also the UK sale will have a tax withholding of 10% which is creditable. You would need to lodge a UK return disclosing the same gain BUT the rules will be different and the DTA rules followed. The UK generally allow Australia to tax the profit after 2012. Seek specific UK advice on this.

 

Come on Paul, you know that you need to consider the residency tests, there could be many ways that you could reside in the UK and still be an Australian Tax resident.

Paterson never said they were born in the UK, they may have been an Australian citizen going there for work. Member of a Commonwealth Super Scheme, automatically a tax resident. t

 

Not between 2003 and 2012 ! High irregular. A contributing member of Commonwealth scheme who resides in UK and posts from Mandurah WA....Ummmm I dont think so.
I don't care where a taxpayer is born. It has nothing to do with tax in Australia or UK. Ditto citizenship is a tax issue only for Eritreans and USA. (Fun fact only two countries tax on citizenship)

I would not be making assumptions and guessing tax outcomes until determining the true residency position. That is Step 1.

 

You're going to have an awfully hard time claiming any kind of main residence exemption and then trying to claim that you aren't a resident of the UK for that period and vice versa. I'm going to assume you're an Australian tax resident at time of disposal but as Paul said, step one will be determining residency at the different times.

Agree with Paul, you're going to want to seek specific UK advice and specific AU advice as well. I don't know for sure but I assume the UK would have a similar system of taxing real property on non-residents that Australia has so you will more than likely need to lodge a UK return declaring the capital gain over there.

At a very quick google it's a legal requirement to report your capital gain event to the HMRC within 30 days of conveyance and you may also be required to pay the tax in that same period, obviously penalties and interest can apply if you do not or have not done this so I'd be getting on it quickly if you've already disposed and done nothing (another classic example of why people should always talk to an accountant before doing this sort of thing so they know what the next steps are!).

After completing the UK portion you can do the Australian return and you will more than likely be entitled to claim back the credits for tax paid in the UK already as per the DTA.

 

Sorry all for the confusion. I did not read the question correctly. I was an Australian as far as ATO are concerned as of 2012 when we arrived here from my mother country of the UK.

Thank you all for your tips and advice. It is looking like we will not need to sell that property now anyway as it was only a way of skinning a cat. I have found another way which is far easier. Not looking forward to the day I do have to sell now though... sounds very confusing.