Please help with dilemma on moving overseas - do we keep buying?

Discussion in 'Investment Strategy' started by WandereringTribe, 14th Jan, 2021.

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  1. WandereringTribe

    WandereringTribe Active Member

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    Hi all,

    My wife and I are about to buy our second investment property. We already have the family home and one other IP. I've read the boards and note the information on the changes to CGT exemptions discussed by @terryw and others.

    The dilemma is this:
    We will hopefully move overseas in 3 years, for medium to long term.
    We want to keep all properties and rent them out until they're fully paid off. If we don't buy another one/sell the ones we have to start again over there.
    Our mission in life is to provide for our two young children (we lost our parents when we were in our 20s and so there are no wealthy grandparents who will boost the family coffers one day.) This keeps me motivated.

    What can we do? Please tell me any thoughts on strategies/structures etc or other ideas about minimising potential taxes on our children, in the future. Happy to pay for legal professional advice, offline also, just PM me.

    Thanks
     
  2. Trainee

    Trainee Well-Known Member

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    Providing for your children doesnt have to mean australian property. Especially if you are planning to move long term. Property where you are moving to, shares etc might be better.
     
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  3. MyPropertyPro

    MyPropertyPro REBAA Buyer's Agents Sutherland Shire & Surrounds Business Member

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    Generally speaking, you are 'residents for tax purposes' in almost all countries on earth where you reside. The two exceptions are the USA and Eritrea - both tax on citizenship and not residency. There are reciprocal tax arrangements in place with certain countries, but these are only to quite restrictive limits for the USA.

    This will mean that any property you hold in Australia will be subject to the tax laws of the country in which you reside if you are not a US or Eritrean citizen. I'm not sure focusing on tax outcomes for your children are necessarily the best way to invest as you should be focusing on the best possible wealth creation overall as their tax position in later life could be vastly different to yours now or what it will be when you emmigrate.

    One potential tax you could avoid on your children (and this will depend where you're planning to live) is death tax. On estates over certain amounts in some US states for example your children will be subject to a death tax that they otherwise may not be subject to if you resided in another country or state. That would probably be the main one I would be looking at for now.

    - Andrew
     
    Last edited: 14th Jan, 2021
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  4. WandereringTribe

    WandereringTribe Active Member

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    Thanks both, yes it's a long view, thinking of children's inheritance but that's our main driver after having financial stability ourselves. We're looking at France and Ireland as our destinations. It just seems as though Australia has changed things to such an extent that it's almost willing you to sell up. I just don't want to do that, if we don't absolutely have to.
     
  5. Takingcareofbusiness

    Takingcareofbusiness Well-Known Member

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    It's not an easy call to make when you don't know if your move will be permanent, but assuming it will be for at least 10 years, I would most definitely sell, or at least sell most properties.

    As you already know, one problem is that after you leave, you can't sell without exorbitant taxes being payed. But the other problem is that they will change the rules willy-nilly, making huge differences to how you should set up your finances.

    I was very frustrated by the changing laws of Australia when I was an expat. The federal tax laws changed and so did some State tax laws. One year Qld land-tax changed their rules so that expats (me) had to pay the same rate as non-residents ('absentees'). I was charged over $20k in land tax that year and the next year it reverted back so that Australian passport holders were not 'absentees', so my bill went back to $5k. This was frustrating because I moved back to Australia that year, partly to avoid this huge new tax. But then the tax disappeared anyway.

    Check out how shares are taxed when you live overseas, especially capital gains tax accrued while you are overseas. This seems to me far, far more generous than tax on property. Unless they change their mind on this, of course.
     
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  6. WandereringTribe

    WandereringTribe Active Member

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    Gah that's so frustrating...goal posts keep moving. I know what you're saying makes sense but I can't help thinking there must be a legal structure of some kind to mitigate these constant changes...I hope there is!
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    With a company you can structure things so that it remains a tax resident while you are not. You could have a company with the shares held by a resident trustee of a discretionary trust so that you can let the income accumulate while you are absent and then draw it out when you come back and are a resident again OR You could cause the company to pay dividends while a non-resident and if fully franked there will be no more tax to pay.

    With a company acting as trustee you could do something similar. Make sure the trust is a resident trust by having a resident trustee. Income could be diverted to a company or paid direct. But when the property is sold the 50% CGT discount could be available.

    best to seek legal advice before doing anything.
     
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  8. WandereringTribe

    WandereringTribe Active Member

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    Terry, thanks so much for that info - I'll certainly look at getting legal advice. We have nobody who could be a onshore trustee - can one's lawyer assume this role?
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes but I wouldn't and doubt you will find any lawyer who would.
    Have you got a relative who could be director of the trustee company? With you
     
  10. WandereringTribe

    WandereringTribe Active Member

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    We have no family here, at all. At best we could ask a friend...Is this a dealbreaker then?
     
  11. WandereringTribe

    WandereringTribe Active Member

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    More of a tax question, but I assume that the GCT component means that you are taxed on 100 per cent of any capital gain BUT that is offset by any losses? Would stamp duty and legals/cost of buying be deducted from the amount taxable?

    In terms of inheritance, perhaps it's better to leave something to the kids even if it is taxed to the hilt, rather than sell up and therefore have nothing in Australia to return to...keen to hear other thoughts on this.
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It depends on how friendly the friend is!
     
  13. WandereringTribe

    WandereringTribe Active Member

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    Haha friendly as in "I'll help you if it doesn't cost me my time or money" (fair enough)...it is a burden on the trustee? This seems to be THE stumbling block here for us. And there's just nothing we can do about not having family here.
     
  14. Trainee

    Trainee Well-Known Member

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    Realistically, if you have no family in Australia and will live overseas long term, why would the kids want anything in Australia?
     
  15. WandereringTribe

    WandereringTribe Active Member

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    Well, the reasons are:
    They are Australian children and they may very well opt to return home one day.
    We've worked so hard to get these properties bought, we really want them to form the basis of a family legacy.
    Also, we may ourselves, retire back to Australia.
     
  16. Trainee

    Trainee Well-Known Member

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    You know your children best. Probably. But experience with migrant children says that if the kids are younger (say <10) their Australian identify won't be that strong, especially if you don't have family here and you don't visit.

    Your reasons are emotional, but you are asking for an objective view, which you don't want to listen to. Be honest with yourself. Is there any reason anyone can tell you which would cause you to sell the properties? Other than non-residents property reverts to the state or something?

    But it's your money and your family.

    Personal opinion, though. Best family legacy is money and the ability to manage it. A house is just a building.
     
    Last edited: 14th Jan, 2021
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  17. WandereringTribe

    WandereringTribe Active Member

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    Fair comment on teaching money ability - we intend to do that. It's not about handing them a silver platter at all, though these things often sound like they are. Personal experience of losing a parent when I was young myself has made me very cautious with my approach to building wealth. I really don't understand shares. That reduces options.....
     
  18. Trainee

    Trainee Well-Known Member

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    Not what I said. My point is, if say you all live in Ireland long term, is it better to leave them a house in Ireland, instead of leaving them a place in Australia? No issue with giving them silver platters as long as they know what to do with it.

    Then it might be a good idea to learn about it and increase your options.
     
    Last edited: 14th Jan, 2021
  19. WandereringTribe

    WandereringTribe Active Member

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    Thanks everyone for the constructive comments.
     
    Last edited: 14th Jan, 2021
  20. Mulianto

    Mulianto ~~

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    Terry, this is exactly what I am looking for...
     
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