What are the potential problems of an Australian expat buying a property [mortgage free] in joint ownership - the expat will not be returning to Australia for a few years and the other joint owner will be residing in the property only paying strata fees ...
From a strict tax perspective : - No CGT discount for the foreign domiciled co-owner and full tax (resident or non-resident rates) would occur (pro-rata) on disposal OR accrue and be inherited by the joint owner if death occurred. - No deductions allowed (since no rental income is earned) - Surcharge stamp duty perhaps (citizen ? Other joint owner residency status needs to be checked) - Land tax surcharge perhaps (citizen ? Where is property?) Surcharge can apply even while property is occupied by other owner. - Base land tax. eg NSW clause 2 of Ruling LT082 Version5 may be available to avoid land tax for the 50% not occupied by the absent owner. May be 100% exempt. Needs to be checked Legal issues re joint ownership need advice. Is the joint owner a citizen ? If not there is potential for their share of ownership to be subject to duties and land tax surcharges, sometimes. Also FIRB rules need to be cleared to ensure they have unrestricted rights to buy a 50% interest. Some joint interests must be disposed if the co-owner moves out.
Property is a Company Title unit in Sydney, present owner, an Australian Citizen. The owner wants to convert the title into joint tenancy with expat as joint owner. Present owner has IO loan on property which will be paid out by expat, then they propose to change the title to joint tenants. Australian citizen is considerably older than expat and the idea is expat will inherit to settle a loan and free present owner of debt. My opinion I like to keep my life simple ...
stamp duty on that Needs to consider the CGT consequences on death too. no ability to get into a testamentary discretionary trust which could enable the non-resident issues to be managed and/or disappear. If connected to NSW the property could easily end up in the hands of another person other than the joint owner - notional estate orders.
Hi guys, Just a quick question. I’m expat and non resident for tax purposes in Australia. If I pass away in current status and my children inherit my IP, will they have to pay the CGT on the year I pass? Or only when they sell in the future? They are resident for tax purposes. Thanks in advance.
They will be liable in the future when THEY sell and your period of ownership would get no CGT discount for that period you owned it as you died while non resident.
Noted, thanks. How about my PPOR if I continue not to rent it out for 10-20 years while being expat. And It will remain PPOR for my children when they inherit it. When they sell, do they need to pay CGT?
There would be issues around whether it was a main residence and whether it was at the time of your death. If not yes tax will be payable and any past exemption for CGT is lost and there is no discount. It would be wise to obtain personal tax advice to support your estate planning intentions Ummm.... they actually recently did the opposite and stripped away past CGT exemptions for use of a home and unless you return for 6 months prior to sale (ie dont die) its likely Australian property would be subject to full tax as if you never lived there. Your main residence
Good luck with that. I suspect your demise will occur prior to any government concessions. What is it they say about death and taxes... inevitable .
Yup, asked anyone in 1990 if interest rate will ever go down to 0.1% mortgage rate at 2%. They’d say will never happen. Heard of tax amnesty before?
