Depreciation for Overseas Buyer

Got a friend who lives in US and looking to purchase property in here. He's US citizen earning USD, currently not Australian resident at all.

I'm under the impression that depreciation will only benefit those who has their tax affair with ATO.
so will it matter to get depreciation schedule for them? can it affect their cashflow?

 

It will benefit non residents - perhaps more so - because their tax rate starts at 32% and there is no tax free threshold.

 

I sort of get it if it's positive cashflow.

what if it's negative cashflow, doesn't negative gearing only works for australian resident who pays tax in australia?

 

Losses can be carried forward to offset future income

 

Each taxpayer may have their own reasons. If the prop was +ve geared then I would agree to claim some depn. If its -ve geared then depn may be best not claimed. That said I have many clients who accumuluate losses and return to become tax residency and then have a tax free holiday for a year or two. Personal advice is best.

 

if say... it's always negatively geared and depreciation will further send the figures into negative; what happen when they sell? Does the accumulated loss over the years offset the taxable capital gain?

is there any CGT discount for non-resident?

 

No CGT discounts for non-res for the period since 12 May 2012 and prior only if they obtain/ed a valuation at that date.

One popular strategy for non res is to accum losses. The capital gain is offset by revenue losses at that time. Claiming depn and CA generally adjusts the costs base so that the deduction is recouped on the CGT calc. For a resident taxpayer there is 50% benefit when discounting occurs. A non-resident may have no benefit in a Depn / CA deduction.

Personal advice would determine if the QS report is worth the investment. In some cases when the taxpayer plans to return it may be a good idea. The concept of claiming a dollar today rather than in the future is evident in this issue.

 

What happens if a ex-PPOR is rented while non-res? Does the 6 year exemption remain?
Assuming no other PPOR while non-res...

 

Yes.

 

An exemption prevails. However the main residence absence test would require that you and / or spouse do not acquire another main residence anywhere else in world in that time AND ensure that your tax residency doesn't trigger a CGT event - This is generally a choice.