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CGT on foreign assets

Discussion in 'Accounting, Tax & Legal' started by locksmithuk, 28th Dec, 2009.

  1. locksmithuk

    locksmithuk New Member

    28th Dec, 2009
    'Morning All (well, it's morning as I write).

    To avoid duplication I've scoured the forums for a similar question, but none found, so here goes: I'm considering selling a foreign property in the coming months, and would like to minimise my CGT exposure.

    Brief facts: a while ago I co-purchased a property overseas for a relative to live in (we are 50% co-owners). A new property is sought in the same location and for identical reasons, but the original must be sold first. Both co-owners are also mortgagees.

    I already have the ATO's CGT literature and I'm doubting that the fact that a) the property was bought before I became an Australian resident, b) the property was purchased as a non-investment property, and c) a pensioner is involved (thinking about pensioner concessions) will excuse me from any CGT liability under Australian law, but if there's potentially an argument to be presented to the ATO I'd love to hear it please.

    I have no previous or imminent capital losses to use as offset against a CGT bill. I could use measures in future years to reduce my taxable income (e.g. I could operate the future property as an investment one by renting it to said relative at market value, and I could assume full responsibility for the mortgage). However, that doesn't assist with the current CGT quandary.

    Any thoughts please?

  2. Rob G.

    Rob G. Well-Known Member

    6th Jun, 2007
    Melbourne, VIC
    Australian residents have the priviledge of being taxed on their worldwide source of income, with a credit for any foreign tax paid on that income.

    With any dual residency issues, you will need to refer to any double tax agreement with that country.

    You can have an exempt main residence overseas.


  3. Intellikev

    Intellikev Active Member

    16th Dec, 2009
    Brisbane Qld
    Looking at the information you have provided the first issue is time.

    When did you purchase the property overseas and when did you become a resident of Australia. In the event you purchased the property before becomming a permanent resident a special cost base rule applies. That is the cost base is the market value of the investment at the time you became a resident. Also the rules regarding CGT changed in 2006.

    It would be wise to talk with a good tax accountant before making any decisions.