non-resident for tax purposes

*Copied from intro thread*
Hello all,
Newbie here!
My wife and I moved to Singapore 2 years ago to follow career opportunities. Now we're considered "non-resident for tax purposes".
We have PPOR in NSW which we're trying to sell now. You've guessed it... we didn't prepare anything or know to have prepared anything before we relocated.

• Yes, we rented our PPOR out when we moved out.
  
• Bought it it June 2012.
  
• Moved to Singapore in March 2015.

What the heck is going to happen to us now in terms of CGT as "non-resi"? Are we still exempt from it if we refund depreciation claims? Quite confused and tired to be honest from reading all the new laws coming up from left right and centre.
By the way, we've applied for "variation certificate" to get 12.5% waived as foreigners. We gathered this is the right thing to do.

Thanks in advance for your help.

 

The law still hasn't passed. Get some proper advice.

 

The first question is are you a resident or not ?

How can you have a PPOR in australia if you are non resident. That would mean residency.

Maybe you mean it was your PPOR

 

I think you have the horse before the cart. Try and see if you are resident, consider the time you change residency and consider the tax profile of each asset and your strategy to dispose of the asset in connection with your future asset profile in and out if Australia.

Once that is in hand you can take a view on current and proposed tax laws.

If you do these filings and tax applications before you know your position you are often reducing future tax options so I recommend against that.

Thanks.

 

The changes to law before Parliament now would mean if you sell after 8th May 2017 while a non-resident taxpayer then any period of residency and occupation as a main residence or the benefit of the 6 year absence rule are retrospectively LOST. This is a very harsh piece of law IMO. Now lets consider if you kept the place and moved back in 2 years. Provided you live here for 6 months then the main residence exemptions are restored. Make sense ? Doesnt make sense to me. It a really nasty piece of law. It doesnt matter if you are a citizen or not. The residency of the owner/s at the contract date prevail. I get the concept but it catches a lot of people it shouldnt target.

The property would be subject to full CGT based on its cost OR perhaps s118-192 (Market Value when first produced rent)....The new law changes have a contentious rule that would strip s118-192 as well. (The idea being it is not now exempt so s118-192 cant apply) Until the law is finalised its speculation on the full content however the law changes are seemingly likely to pass.

The new law does contain a grandfathering provision which may save you. The main residence exemption may then cover the whole period of ownership. A issue for advice.

Ross is correct - Also get advice on the date your residency changes. I suspect you were unsure about returning and after 2 years its generally considered that the change occurs. But thats not always the case.

I'm not convinced you can apply for a withholding variation based on residency. If you are non-resident the only variation is for actual tax which could be $0 or a higher amount.

 

the 50% CGT discount would be lost too.

 

Non-resident for tax purposes coz we've moved out of Aus to work overseas temporarily. Still an aussie mate. that's why i'm buggered.

 

Thanks, Paul. that's why I'm here to seek help. Gosh a lot of harsh rules popping up nowadays, while all public assets and projects are being sold off to foreign investors at mega scale.
Good point on grandfathering provision - I don't know what that is yet, but sounds like it's worth reading up about.

Thanks, @Ross Forrester, we'll sort out the tax returns with the accountant first.

 

If you still have a home here and are only gone temporarily are you sure you are a non-resident?

 

As statsd the law changes are still in draft, but I believe current draft states that the rules are grandfathered for properties owned prior to 7 May 2017 and sold before 30 June 2019.

Of course this is really only relevant once it is passed, but more importantly once you have first determined your current residency status.

 

Moved overseas temporarily. All the case law ive read suggests that temporarily means you will be classified as a tax resident of australia.

Once you come back to australia and start bringing money back in from singapore this will be when questions are asked.

 

Temporarily....that could be the difference. Get advice

 

"temporarily" as in figure of speech. been here for 2 years and project is still at an infant stage. can't tell how many years I'll be here, so I'm heading back to Aus in 2 years? 3 years? 4 years? can't tell. How do you plan these things?

Referring to @Ross Forrester, "the horse" has arrived. I got an email from ATO yesterday saying they've approved my foreign resident capital gains withholding rate variation. so 12.5% is safe. Does it also mean CGT exemption is also applicable?

 

anyway, I'll see if my regular accountant knows this much and this up to date, once he's looked at my case.

 

No. But it still may apply.

 

The issues with residency are sometimes highly complex. The little things can sometimes get you.

And the dollars involved can be susbtantial as singapores tax rate is around 15 to 20% and australia tops out at 45%.

My advice is to get a private ruling. It gives you some certainty. Unfortunately in many cases it comes back as tax resident but at least you arent looking for tens or even hundreds of thousands of dollars later on. Just tell your accountant do a private ruling for me. Costs would be between 2k to 3k.

At least you can sleep at night and not wonder if a ticking time bomb awaits you on your return to australia.

One of the financial risk mitigation strategies for anyone moving overseas is to do a private ruling. Most dont. I dont know why to be honest. Its a very cheap insurance policy.

 

Good view. Residency is often not as certain or uncertain. And the online residency calculators (there are two) are often incorrectly used and incorrectly answered. Rendering them useless. eg The question for someone departing Australia asks about emigration. The hyperlink explains the visa and other conditions. Most visa entry is NOT emigration.

I went through this ruling process for a taxpayer and I was blown away. They are working long term in PNG. But on a temp visa. Maintaining a home here. Super is still paid to Australia by the employer. ATO said = AUS tax resident which didnt surprise me. BUT then they continued on.

ATO also said DO NOT include PNG source income in the Australian return. A special treaty rule exists for PNG. As a former AU territory wages are exempt and taxed at source in PNG as a final tax.

The other issue to address before departure is CGT events. A change of residency can trigger CGT for non-Australian property and non-property assets.

 

Hmm
You could be borderline.

What is your accommodation arrangements at work?
How have you established yourself in the new country? Connections, clubs, housing, vehicles, assets, bank accounts etc?
How often do you return to Australia
How did you complete your immigration card on exit?
What did you do with your belongings in Australia?

These were just some of the 40odd questions I was asked by the ATO audit to determine if I was a resident or not.
Legnth of time in (or out) of Australia is one part of it, but its not the be all and end all.

I'm no expert, but have lived through what your going through now.

Blacky

 

Used your medicare card lately?

 

@Blacky @Terry_w

• We pay for all rent and expenses here. The company doesn't.
  
• We return to Aus once a year (in the last 2 years) coz my family (parents, brother, aunties, etc.) is in QLD.
  
• We said Aus resident temporarily leaving the country on the departure card, coz that's what we're doing. Just a matter of how many bloody years we couldn't decide/predict. And we've kept our PPOR since then (rented out while we're away).
  
• Haven't used medicare since we relocated (didn't have to). They're now expired! Gosh.
  
• Haven't declared tax in the last 2 years coz been so busy (and unorganised). So, we're doing it now. Accountant previously mentioned, we're "non-resident" back in 2016 through some emails.
  
• Last year, our bank said we couldn't refinance and borrow (to buy closer to family in QLD) coz our foreign income level doesn't meet local criteria.

*dizzy and exhausted in limbo*

It's ok. I'll just wait for my accountant's instruction. Can't do much now.