Will I loose all my Negative Geared / Depreciation benefits?

Discussion in 'Accounting & Tax' started by FlippingDave, 23rd Sep, 2017.

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  1. FlippingDave

    FlippingDave Member

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    What happens if I leave the country or just stop working?

    I'm currently buying a couple of investment properties and am new to the game.
    Earning an average PAYE income in a full time 9-5 (don't own my own home).

    My first is a single family home for 360k and cash flow negative (neutral after tax and depreciation).
    Second one I'll probably find something cash flow positive..

    I wondering if one day I stop earning an income from my JOB or am to go live in a country Australia doesn't have a tax treaty would I still be getting any benefit from negative gearing and depreciation?
    ...or does it all depend on my PAYE income?
    Would I still get a benefit from my rental income?

    Or am I shooting myself in the foot?
    Thoughts appreciated and keen to hear from those of you who know what you're doing :) I'll be there one day..
     
  2. Joynz

    Joynz Well-Known Member

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    How likely are you to leave the country and, if so, how soon?
     
  3. FlippingDave

    FlippingDave Member

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    Good question. It could be a matter of months at the earliest but could also be years.
    I'm more just trying to get my head around how it all works to be honest.
     
  4. Blacky

    Blacky Well-Known Member

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    Depends on if you become a non-resident of Australia or not.
    'Leaving australia' isn't always enough to become a non-resident.

    Assuming you do become non-resident you will continue to pay tax on Australian sourced income. However you won't pay tax on foreign sourced income.
    If you have a tax loss in Australia, you can offset foreign income (cos it's not declared in aus). So the loss will carry forward until you have a profit in Australia.

    The end result is tax payable in the country you move to, and accumulating losses in Australia.

    Blacky
     
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  5. FlippingDave

    FlippingDave Member

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    Thank you Blacky

    For starters, to make matters more confusing, I'm a New Zealander.

    Are you saying I can 'accumulate' my losses for future years?
    So lets say I had no income at all (or worked on international waters has I have done in the past) for two years, I could then offset those losses if I came back and worked in Australia in year three, surely not in a different financial year right?
     
  6. Marg4000

    Marg4000 Well-Known Member

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    Possible tax treaties between Australia and NZ?
    Marg
     
  7. Trainee

    Trainee Well-Known Member

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    If you have no job income and your property is negatively geared, what are you living on? Its an unreasonable scenario. If you can retire on a portfolio you would probably have net positive income. If your sophisticated enough to have offshore assets by then, your accountant will figure something out.
     
    Last edited: 23rd Sep, 2017
  8. Blacky

    Blacky Well-Known Member

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    Firstly - New Zealand is different. I know australia and New Zealand have very strongly linked systems. So I'm not sure how that would work.

    But yes, ultimately as long as you are non resident you accumulate losses which can then be claimed against in future years.
    If you are non resident your foreign income isn't declared, so it's irrelevant what you earn. However, if your not working, why would you want to be a non-resident?

    Assume you have a tax loss of $10k/year. And spend 2years away.
    On returning you know have $20k to offset in year 3.

    Just remember you need to be a genuine non-resident though. This isn't as simple as it sounds. And it's likely if you're only leaving for 2 years you won't be.

    There are also other factord to consider such as CGT. Becoming non-resident may trigger a capital gains event.

    Blacky
     
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  9. FlippingDave

    FlippingDave Member

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    Yes @Marg4000 there is somewhat of a treaty but I believe the depreciation works differently in NZ so that'll be confusing for me in the future.

    You're right @Trainee that's why I'm looking into it and possibilites of recooporation in the future.
    However anything from working on ships where you don't pay tax to living in a trailer could pop up temporarily.
     
  10. Blacky

    Blacky Well-Known Member

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    Combination of small income from rent and cash savings.
    I know several guys who like in bali/Indonesia who will do a 6month contract. Save $20-30k and live cheaply in bali for 12-18months surfing.
    Rinse and repeat.

    Blacky.
     
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  11. FlippingDave

    FlippingDave Member

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    Thanks for the example @Blacky. Makes it much clearer for me.

    I'll have to google about and find out what us Kiwi's who just wander over on automatic visas become both while we're here and when we leave again.

    How does it work if I am a 'resident for tax paying purposes' (which I believe I am)? Can you as an Aussie still take off on holiday for a few years and come back to claim all those past years offset in one? Or can you claim some sort of positive tax return much like businesses do?

    ...I think I'm in over my head today.
     
  12. ellejay

    ellejay Well-Known Member

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    This is similar to what I'm doing @Dave Sandford . Working part of the year in oz living part of the year in nz currently. I'm tax resident in Aus. I keep my portfolio positive as a whole because I want income from it to keep doing what I'm doing. Swings and roundabouts with tax and the pros and cons of each country.
     
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  13. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Arriving in Australia you are subject to a statutory test of 183 days. Departing you must intended to depart for a fair while (2 years plus plus)

    There are two calculators the ATO have - One for inbounds and other for departing persons. Take care each answer is read in FULL and carefully selected. Eg the word emigrating is used for those departing.