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Tax implications for overseas Off the Plan property sale

Discussion in 'Accounting & Tax' started by doobynuts, 26th Jul, 2015.

  1. doobynuts

    doobynuts Member

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    Can someone help with the tax implications of the below scenario:

    So I bought an Off the Plan apartment in Dubai in 2005 and it still hasn't been completed.
    Paid 50% $55k and then pay $55k upon completion.

    Developer has now offered my money back which in today's exchange rate against the dirham is $73k.

    Can I just bring the 73k back into Australia with no tax implications? Or have I made a capital gain of $18000 even though the apartment has never been built?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It doesn't matter whether you bring the money back or not. Sounds like a capital gain to me.
     
  3. doobynuts

    doobynuts Member

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    Thanks Terry. I thought it would matter whether I bring it back or not. So I paid $55k USD in 2005 and the developer is giving me back $55k USD 2015 which is a gain of zero. So if I go to Dubai and piss all the money away on gambling then how have I made a capital gain.

    Or do I have to convert the $55k USD into AUD on purchase date and sale date and then the difference is a capital gain regardless If I bring the money back or not. Does that make it a capital gain on property or gain on foreign exchange transaction?

    To complicate it even further I paid the $55k over a period of 4 years. So would I have to convert each instalment from USD to AUD at the time it was paid?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Think of it as if you made the gain here - same concepts. If you made $25k and urinated it up a wall you would still be taxed.
     
  5. Blacky

    Blacky Well-Known Member

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    Terry can you explain further?
    I don't understand how there is a profit? If you buy if for $55k and sell it for $55k?

    Blacky
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Above you said you would get $73k back are you saying the local currency purchase and sale price are the same? Sorry, I miss understood if that is the case there may be no profit, but may even be a capital loss.

    Confirm with your tax agent.
     
  7. Blacky

    Blacky Well-Known Member

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    The way I understood the OP was that he paid USD$55k and will now get USD$55k back.
    However from the date of purchase to now the AUD/USD exchange rate has moved in favour. Therfore there is an fx 'profit' of $23k AUD.

    My understanding is that there is no profit. However, I may be wrong with this.

    Blacky
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The AUD exchange rate at the dates of relevant CGT events (acquisition and disposal) must be used. The ATO have official rates or actual rates where known may be used. As others indicated this may result in a CGT gain or loss even where the amount paid was contracted in USD.

    Australian tax is always based on the AUD value of that USD. Whether or not it was actually realised or bought back to Australia. This assumes you are a resident AUS taxpayer.
     
  9. sumterrence

    sumterrence Well-Known Member

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    but how is this going to be capital gain if he just simply transfer $55k USD (original USD amount being transferred) back to his Aus account? and show up on his balance as $55k USD?
     
  10. doobynuts

    doobynuts Member

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    To make it a little more confusing I did not pay the $55k up front. I made 11 payments of $5k each over 3 years from 2005 to 2008. So does that mean I have 11 CGT events and I need to work out the exchange rate USD to AUD for each event - add the 11 AUD totals and then subtract from the final sale of $55k (which is currently $75k AUD) to get a capital gain/loss.

    So is the capital gain/loss based on a property sale or as a foreign exchange? Because if it's property then surely it's 55k purchased and 55K sold so no capital gain.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What currency was the payments made in?

    See Paul's comments above.
     
  12. doobynuts

    doobynuts Member

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    Made the payments in AED dirhams but will receive it back as USD. The contract was in AED (I just changed it to USD for this thread to make it easier to understand).

    Also, I was a non resident for tax purposes when I signed the contract. I had been out of Australia for 5 years with no ties (family, investments, income etc) to Australia.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If the contracts were done in a foreign currrency then you would need to covert it to Australian dollars at each step.