Possible expat job- impact on investment portfolio

Hi,
I need some advice, hopefully the accounting guru's out there can help...
I have been offered a job in Malaysia and I am trying to figure out the impact on my property portfolio. At this stage I would become a resident over there for tax purposes

I have a portfolio of 4 IP's $1.93m value, $1.52m owing, roughly neutrally geared at these interest rates. My concern is the cost of the portfolio will shoot up if I don't have an aus taxable income, and any income i do get here would be much lower than present.

Are there any strategies I should use to minimise this impact of loss of gearing? can I carry forward my losses into future tax years? Not sure what to do and i'm concerned I might not be able to take the job if the financial impact is too much!!

 

Your Aus taxable income will still be neutrally geared so shouldn't make much of a difference to Australian tax. You don´t lose gearing by being non-resident, but does Malaysia have some crap laws on rental income deductions like some European countries do ? Even the UK now is pretty rough on interest deductions (not fully deductible anymore), forcing many investors to sell up. Also in Spain only EU resident members are allowed interest deductions, so poor bugger British investors are about to be shafted due to Brexit (idiots), they will soon pay tax on gross rent, with zero deductions allowed. So Malaysian law plays a big part in your decision.

Another bummer though is the loss of the capital gains tax discount while you are non-resident (since 2012). Perhaps try and stay "resident" somehow if you can, it is sometimes possible to be resident in two places, this can be bad or good, depending on circumstances (non-resident usually better, but not always).

 

Try to get as much loan as possible before u fly

 

first question is whether you are a resident of Australia still for tax purposes ?

what type of visa you on in Malaysia ?
will you retain your PPOR and plan to return to it ?
Will you keep any motor vehicles in Australia ?
Are you still on the electoral role ?
Have you informed your private health fund insurer you will be non resident ?
where are your furniture and fittings (in storage ? - if so why).
Do you have family in Australia ?
what did you tick on your departure card ?

what steps have you taken to show you have emigrated to Malaysia

 

Lots of info covering this on the ATO website.

Being non-resident for Australian tax often isnt as simple as simply leaving and taking a job overseas. There are quite a few hurdles you will need to get through.

If you are non-resident for Australian Tax you will simply pay 30% tax on all Australian income but nil on your overseas income. If you remain resident you will pay Australian rates on all income (including international).
Your property may be cash flow +ve but are they also tax possitive after including depreciation?
Being non-resident you will not be eligible for any capital gains discount.

Why will the cost of the portfolio shoot up if you dont have an Australian income?
(I am guessing something to do with tax deductions?)
This may be more than offset by not having to pay income tax on your overseas income.

Any tax losses will be carried forward until such time as you start earning taxable Australian income again.

Best to discuss with an accountant well qualified in international tax matters.

Blacky

 

I dont get this. You are neutrally geared. You are going overseas and therefore I assume paying less tax and your concern is that you will get less back from the ATO as you are paying less tax.

Have you modelled this on a spreadsheet?

 

Agree that you have to model this. I got some info from these guys years ago: Australian Property Tax and Finance Information but there are lots of advisors.

 

Land tax theshold for qld property may decease and the rate may increase.

 

A mate did this while working in Korea and ended up saving 300k in tax as opposed to still being an Aus resident. There where a few hoops to jump but if you are going to save 300k in tax and convert it back to an hourly rate for effort expended it would be an impressive reward.

He had a case lodged with the ATO and kept the 300k aside until he new he was in the clear. He helped a workmate out to accomplish the same.

Ended up paying of his PPOR and bought a brand new Prado with the proceeds.

 

Ive been a non-resident for about 8years now. I have never calculated the tax saving but $300,000 wouldnt be out of the question.

As you say a few hoops to jump through - but with a good accountant its not that much effort provided you are a genuine non-resident and not just trying to skirt around the system.
However, its costly if you dont do it right.

Blacky

 

I dont think I would have saved much at all by being non resident. The main factors:
- loss of franking credits - other countries do not recognize this and tax at full rate
- loss of lower tax thresholds, and low tax rates in Australia
- loss of capital gain tax discount

I would gladly be a resident of Oz and non-resident in Spain but sadly not possible.

 

Getting new borrowings or a refinance would be tough as an expat (with limited lenders to choose from).

 

As an Australian citizen - though non-resident for tax purposes - most banks will still lend to you. Their requirements are more stringent and if you earn foreign currency they are conservative on the valuation of this.
For servicing a fairly standard model is 80% of the current converted amount. Some banks will also assume you pay tax, even if you dont. So for servicing calcs they may show only 50% of your actual salary.
Lending is often capped at 70%LVR. Not sure about LMI but Im sure a broker here would know.

It is possible, though more conservative.

Blacky

 

Whether you would save tax or not will depend on where you invest.

If you invest in Australian property you will end up paying more. But if you invest in non Australian shares you may pay less tax.

 

Exactly!

The whole resident/non-resident thing is very individual specific - which is why it is so important to get personal taxation advice before moving overseas.

Blacky