Hi,
I’m looking at buying property overseas, so far these are some questions that i’ve come up with. If anyone can help in answering them that would be terrific.
Finance:
If investing overseas do I obtain finance in Australia or in the country of choice? I realise that I will need an account in that country (real estate agents fees etc etc).
There’s been some different opinions posted here, does anyone know if it’s 70 or 80% maximum lending capacity for an overseas IP?CGT:
Is Captial Gains Tax only payable if I sell the property and bring monies into Australia? What if I leave the money in the overseas account until I invest again? Do I pay anything on the weekly earinings that I bring into my Australian bank account?Insections and tax:
Although I seriously doubt it, can i claim any travel expenses for inspecting an overseas IP?(i’m going to ask my accountant when I get back from this holiday)First Home Buyers Scheme
Am I still entitled to the scheme if I own several IP’s in another country and then buy in Australia? (provided i intend to reside in the property for 12 months etc etc)Okay,
If you’ve managed to read through my list, thanks I hope your still awake? Any assistance would be excellent, especially from investors who have already made the commitment…One last one, despite how much research I do into the proposed areas, is it natural for my stomach still to churn every day about making the first big step? I realise that with time and more investing it will probably become second nature??
Thanks again, have a great New Year!!!
Itsamoorey[
]Hi,
I’ll have a stab at some of the answers although I recommend seeing an appropriately qualified and experienced professional re: tax matters.
Finance
I’ve looked into this and most major Australian lenders will lend on OS property, but they want Australian property as security.
This makes it tricky, so to get around this I have just jumped through the finance application hopes in the OS areas where I invest (don’t ask).
Such borrowers have lent 70% LVR, but I know of people who have secured 80% LVR. It all depends on the risk profile of the applicant.
CGT
I don’t know the answer to this one, but I would have thought that CGT only applies to Australian assets (ie. Australian source).
What is more likely is that there will be a double-tax treaty with Aust. and the overseas country that will outline how profits are taxed.
Bottom line: you’ll have to pay tax, but you shouldn’t be taxed twice.
Inspections and tax
If you have Australian income then expenses associated with earning that income are deductible. It’s a matter of the timing of the expense and whether or not you’re showing (or are likely to show) a profit from the investment on your Australian tax return.
If not (or in addition to?) Australia, then you should be able to claim the expense against any tax in the country where you are investing.
FHOG
I think so… but check this out. My understanding is the grant is only applicable to and in relation to properties in Australia. I’d imagine that you would have to be an Australian citizen though, in addition to all the other qualifying criteria.
Stomach Churning…
[
] Fear is always present, but is overcome by isolating what can go wrong and having contingency plans in place and readt to roll out should things turn sour.Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
If you are thinking of investing overseas doing so in New Zealand may prove easier and possibly more cost effective than elsewhere. NZ has no capital gains tax, no land tax (apart from rates), no stamp duty, and has a highest personal tax rate of 39c in the dollar. Conversely we have higher GST (12.5%) and higher company tax (33%).
Tax advantages aside New Zealand speaks the same language, has a similar legal infrastructure, has a stable government and has a currency that doesn’t seem to fluctuate to wildly compared with Australia’s.
And finally it can be a great place to visit when you are on company business checking on your Queenstown tenants!
Good luck, Julian.I would agree with Julian’s comments re: investing in New Zealand, which we have been monitoring and investing in for some time.
In terms of taxes and foreign investment policies, this location is not complicated, especially if you originate in Australia.
However, although New Zealand does not have CGT, capital gains tax does apply on income/capital gains derived overseas [in Australia].
— Michael
Steve, Julian, Michael.
Thanks for your replies.
Steve,
Thanks for your reply, also thanks for starting this website so other investors can get good advice in a quick fashion as well as experience from people who have already jumped the same hurdles.You must have run into critic after critic… I’m constantly told by friends and family that positive cashflow won’t work. I’ve given up trying to explain it to them now (as biased ears never listen neutrally) and just lend/buy them a copy of your book. That seems to put an end to the critics.
I’ll definately find some good tax advice, i’ll just have to find a good accountant in my town first. (hello specifically property forum)
Thanks again for the help guys, happy new year.
itsamoorey.[
]One of these days i’m going to put a good, funny, witty comment here.
Michael R
Despite Australia’s convict heritage they are usually very welcome as potential NZ citizens, and that might be one way of avoiding paying capital gains tax when returning to Australia. It would be a big step to take, but as NZ and Australia have fairly open reciprical rights for its peoples working and living in each other’s country, you could (I believe) quite easily return to live in Australia (after a time) yet not be forced to pay capital gains tax on moneys earned in NZ when taking those funds to Australia. Just a thought. On the other hand perhaps it’s easier to just pay the tax. Most Aussies I know would rather die than give up their nationality – and that is so very understandable knowing what a fantastic country you have over there.
Best wishes , Julian
Such borrowers have lent 70% LVR, but I know of people who have secured 80% LVR. It all depends on the risk profile of the applicant.Hi Steve, do we take it from this that the lenders didn’t like your risk profile and would only give you 70%?
regards,
Rod.
Julian
In response to your comment below, at this time the two countries are independent in terms of tax policies meaning funds returned to Australia would be subject to CGT.
This policy is not likely to change in the foreseeable future. New Zealand would in effect have to become a state of Australia, which implies New Zealanders would then incur CGT.
For some time the New Zealand government has considered its own CGT [which may effect your due diligence] however at this time they appear to understand the negative impact this would have on [much needed] direct foreign investment – even with double-tax agreements in place.
— Michael
“as NZ and Australia have fairly open reciprical rights for its peoples working and living in each other’s country, you could (I believe) quite easily return to live in Australia (after a time) yet not be forced to pay capital gains tax on moneys earned in NZ when taking those funds to Australia.”
Michael R, but if you became a NZ citizen and listed NZ as your primary place of residence then any monies taken to Australia would surely be as a NZer taking funds to another country, and therefore not subject to capital gains tax in Australia. I actually had my tongue in my cheek when I first muted the idea, but on further consideration thought it could be viable. Changing nationalities would not warrant consideration for the great majority, but thought it was worth exploring as an idea. Thanks for your reply.
Regards, JulianGuys,
and not support the wallabies anymore?
sorry, couldn’t do it!!!
itsamoorey[]One of these days i’m going to put a good, funny, witty comment here.
Hey, you get better odds on the Wallabies when betting on them from this side of the Tasman! But your point is taken.
Regards, Julian.there is a difference between country residency and tax residency, and you can in fact be tax resident in both Australia and NZ at the same time, yet only physically reside in one country. Have a look under the NZ IRD website http://www.ird.co.nz and you should be able to find guidelines to who is a tax resident in NZ. Its all about being there around half a year or more. Hope this helps.
Tas [
]itsamoorey,
At first I wasn’t sure whether you lived in Australia or overseas. As I don’t follow football it is still no obviouse but I will assume there are no Wallabies in NZ so you are a citizen of Australia.
First you need to e-mail me at [email protected] for a copy of my overseas booklet which covers all your questions at length and probably adds a few more. Some basic points that might interest you:
1) Australia is entitled to tax you on a gain made anywhere in the world. The gain is calculated on Australian tax law.
2) Shifting residency will automatically trigger a capital gains tax event even though the property is not sold.
3) You will not be taxed on the money when and if you bring it in because King John (Robin Hood) would have already taxed it as above.
4) To claim travel expenses overseas you need to keep a travel diary and receipts. The days spent in relation to the rental properties compared to holiday may be used to apportion the travel expenses unless you can convince the ATO the trip was primarily to inspect rental properties.
5) Owning a home overseas will not effect your eligability for FHOG.
6) When I last refinance to take advantage of minimal risk opportunities but realised the repayments (which would be more than covered by a positive cashflow) I had to stay very close to the toilet for quiet a while. And I am a CPA. But how else do you expect to make money? Just make sure you have covered all possible outcomes. My first time I was ridiculed by my friends for taking on so much debt 2 years later when my ship came in I was scoffed at for being so lucky.Julia
Everyone,
thanks for your replies.Julia,
Where do you work? I’m currently looking for a CPA in the North Queensland area. I’d ideally like to build my entire investment team around that area but I’d be happy to have them scattered accross the four winds if they were worth their weight. It would be nice though to be able to operate on a face to face basis rather than via the net, phone, fax.Have fun,
itsamoorey[]
[email protected]One of these days i’m going to put a good, funny, witty comment here.
Can someone please clarify how the capital gains tax thing works if you sell in NZ for a profit and bring the money home to Oz?
As a general rule, Australian residents must pay tax on all income, whether it arises in Australia or overseas.
This includes foreign wages or income such as rent/profit derived from foreign property and dividends from shares in foreign companies.
However, tax already paid in the source country can be offset against this liability.
You should contact a qualified tax/financial advisor to discuss your situation.
— Michael
Hi all, another question I need general advice for: If I purchase in NZ I know I do a tax return over there for the year.
When I bring the money home to NZ, does my accountant simply take the income figure for the NZ tax return and (accounting for the tax credits) add it to my Oz income?
If that is the case, then you would need better returns to get the good cash flow pre tax, as the NZ return only pits expenses against the rental income, and leaves no room to put the expenses against your personal income in Oz and give you an even better after tax position. ???? is this convoluted, but does anyone get what I am trying to ask?Perhaps an example: can I claim the depreciation on my NZ house as a cost against my Oz Income, or is it what I asked above?
Cheers
LisaRHi!
I have been reading the previous emails, and am wondering if you buy a +ve cash flow property in NZ and don’t bring the money back Aus will you still be liable for any tax in Aus?Hi All..
I too am also interested in purchasing some property overseas. And was wondering if anybody some advice on wich banks would do loans for property in Europe.
I would like to hear from anybody who has actually succeeded in buying and selling who are living in Australia.I have already enquired with banks that are local to the town in wich I am interested and none can really help, as I would be considered high risk. Not having an income within that country and I didnt setup a bank account when I was there.
I didnt intend on buying anything when I went there, but only thought of it when I returned. Time for a trip back I thinkCheers
GlenI have been reading the previous emails, and am wondering if you buy a +ve cash flow property in NZ and don’t bring the money back Aus will you still be liable for any tax in Aus?hi Ben,
Yes, if you have invested in your own name you will pay tax on the income in NZ. You will also have to declare this NZ income on your Australian tax return, but you will get a credit (in OZ) for the tax already paid in NZ.
regards,
Rod.
]
]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
