Expat taxes/duties

Hi all

I am trying to get my head around all the extra taxes and duties that apply to expats that are Australian citizens for property investment.
Could anyone please help me out with what I am missing?

Eg
- don’t receive 50% capital gains tax reduction.
- extra stamp duty (or was it land tax?) in qld.

I’m particularly interested in what applies to Australian citizens, which I believe excluded the additional duties in some states.

Thanks!

 

land tax in QLD
income tax - different rates, no tax free threshold.
Tax in the country of residence.

 

Thanks Terry. Forgot the income tax side but yes already getting hit there on shares.

Trying to get my head around how much of a disadvantage it is investing in property from offshore, and if it’s worth it at all. NZ seems a bit more generous for aussies atm, although if there’s one market globally more hotly priced than Aus it’s probably NZ.

Not seeing many other good alternatives. Uk rolling out big change to interest deductibility etc.

 

• Absentee land tax in QLD !!
• Additional duties tend to be exempt if you meet a citizenship requirement.
• No neg gearing BUT you could accumulate a tax loss for future years
• Issues with access to finance. Many lenders are tough on offshore borrowers and the servicing tests may not be met.

NZ do have a CGT issue for property sold within 5 years (google NZ brightline test) but they killed off some indirect taxes a while back.

https://www.ird.govt.nz/resources/c/4/c4a5467f-e73b-4bb0-b50f-e05f215b5a1c/ir361.pdf

 

Thanks Paul

I can see finance being the biggest issue, just trying to get my head around if it’s worth the effort.

I’ve spend 5+ years building up some capital to get involved, while also worried about market prices. Now have a few hundred k for deposit, plus market is falling, but now seems like finance has disappeared. Very annoying.

 

STG used to be good for unit trusts - No idea if they still are in the game

Have you also considered a ungeared unit trust and use SMSFs as unitholders ?? Can also be other unitholders that arent SMSFs. A SMSF may pull the loan down (since it uses cash) and if the unitholders have equity elsewhere it can leave the property unencumbered. SMSF gets +ve income at a low tax rate and unitholders with loans get -ve gearing. This can also help with land tax (some states)

You could also personally lend that cash to a unit trust provided its a corp trustee its not complex. Legal loan agreement needed.

And then there is a widely held trust. Doesnt have to be as wide as many think.

 

You will also need to consider residency issues with companies and trusts.
A company requires at least 1 resident director. But if you can overcome this then many of the tax issues can be managed. Just make sure it doesn't end up to be a foreign controlled trust.

 

Thanks Paul and Peter.

Without fully grasping those suggestions, they do sound like very useful options to consider. I’d love to sit down and hash them out with you, but don’t want to waste your time when I’m a while off pulling the trigger on anything yet.

The only question I had at this point Paul was does your first idea assume sufficient capital to fully fund the purchase with equity, otherwise who is doing the borrowing? And such a structure wouldn’t get around the servicing issues as an expat would it? Sorry if stupid questions.

Also not sure if the scale I’d be starting at could support the ongoing costs of such structures, although more than happy to be proven wrong.

In addition to the residency issues, one point I’m trying to get my head around is that I believe japan has no real concept of the trust as in Aus legal system. Also, money transfers between husband/wife constitute ‘gifts’, which can incur very severe taxes if they exceed a certain limit. Put those two things together and my contributions to a trust with us both as beneficiaries could incur very harsh tax consequences at the outset here in japan. At least that’s how I understand it all at the moment. So when I’m ready to get into the game, that’s another messy complication I’ll need to consider.

 

what part of Japan are you in? I go there 2 to 3 times per year.

 

Terry i'm based in Tokyo these days. Spent a long time in Kobe years ago but in the big smoke these days. If you are in town then get in touch. Love to buy you a beverage.