Getting equity from PPOR overseas

Hi! I need some advice please

This is my situation, I have a PPOR overseas, I went to a local bank and ask for valuation of the property and they said I have more or less 140K in AUD equity that I can borrow payable in 10 years @5% interest P&I loan. My salary is around 100k/year and with the amount that I can borrow I think I can buy an investment property worth 600-650k.

My questions:
1. Is it a good idea to pull the equity out from PPOR abroad and buy an investment property here in Australia?

2. Can I claim tax deduction for the interest part of the loan since I am using the money to buy an investment property?

Thank you very much!

 

1. It could be but more to consider such as exchange rate fluctuations.

2. Yes it could be

 

A principal place of residence cannot ever be overseas. A former residence under the CGT main residence rules at present may for now however proposed laws expected to pass are expected to retrospectively terminate such a concept. I wouldnt expect this law change to get too much opposition.

 

For your reply Terry, that is something I need to consider as well because the AUD is too expensive at this time 15% higher that last year.

 

Hi Paul,

Thank for your input. Can you please explain more of this? I just moved here in Australia 3 years ago, I still have my house overseas, can this have any effect on any tax laws here?

 

Where o/s???

 

The Govt has proposed laws that will only allow the main residence exemption to apply in any way to an Australian property subject even to tax residency when it is sold. Its proposed that the overseas property would not be given any CGT concessions when it is sold. If you depart Australia it could trigger a tax liability too, as a CGT event applies to non-Australian property when you depart Australia even if its not sold.

 

Philippines

 

Hi Paul thanks your reply,

What if I sell my house overseas, I also need to pay CGT there, is it not immune to double taxation law?

What will be the basis of ATO for CGT if the property is not sold when I depart Australia?

 

Depends on the country. Australia retains a right to tax all worldwide income and capital gains. If foreign tax is paid and its a treaty nation a credit may be given in whole / or part.

When you depart Australia CGT event is triggered and CGT become payable. If the property is Australian property (ie it is in Au) then the taxpayer may choose to defer the tax until actual sale but if its not AU property or its shares etc there is a deemed sale that is taxable based on market value at the date you depart. The 50% CGT discount may be recognised at that time but not later

 

not sure which country and PPOR but in Singapore ppl do this all the time, some of them have properties that are fully paid off they just refinance at 0.99% to 1.99% HSBC ANZ and then use that funds to purchase in Australia. For the commie lovers - sorry there is no restriction if it for legitimate purposes. it ain't china.

 

the most painful part of selling your property in the Philippines will be repatriating peso back to aud.

the BSP has very strict rules on remittances of peso to foreign currency. will need to prove you paid your 6% capital tax gains, tax clearance certificates, etc etc before they will let one peso leave.

its easy getting money into the philippines. very difficult getting it out.

philippines you pay a 6% flat rate on sales price. its not a true capital gains tax but more a flat rate tax on the sales price.

if you are an australian tax resident you will be able to take advantage of the double tax treaty for some tax relief but it wont be much.