If you send your e-mail address to [email protected] I will send you a booklet I wrote for people overseas. The following is just one of the articles out of it:

Becoming a Non Resident of Australia for Tax Purposes
IT 2650 examines the relevant factors in depth. Generally if a person leaves Australia for more than two years and sets up a home in another country they will be considered not to be a resident of Australia for tax purposes right from the time they leave Australia. Note it is possible to become a resident of more than one country at the same time.
Upon becoming a non resident of Australia ITAA97 section 104-160 deems a capital gains tax event to have occurred. This is that you are considered to have disposed of all your assets, that are not “connected with Australia” and acquired after 19th September, 1985, at their market value. Accordingly, you will be subject to capital gains tax on any increase in value over their cost base. The following is a list of assets “connected with Australia”:
1) Land, buildings and structures in Australia
2) An interest or right in land in Australia
3) A strata title flat or home unit
4) A share in a company that owns 1, 2 or 3 above and gives the shareholder the right to occupy.
5) An asset that has been used by its owner at any time to carry on business through a permanent establishment in Australia.
6) A share in a private company that was a resident of Australia when the share was sold.
7) An interest in a trust that was a resident of Australia when the interest was sold.
A share in public company that was a resident of Australia when the share was sold and the non resident and associates had control over more than 10% of the shares at any time during the last 5 years.
9) An unit in a unit trust that was a resident of Australia when the unit was sold and the non resident and associates had control over more than 10% of the units at any time during the last 5 years.
10) An option or right to acquire any of the above.
11) Various provisions associated with rollover relief.

Section 104-165(2) gives you the option of ignoring the capital gain accrued when you leave the country but this will effectively mean you are taxed on any gain while you are a non resident. The options offered by Section 104-165(2) are:
a) Defer the CGT and pay it when the asset is sold but the tax will be on the gain over the whole period up
to the sale including when a non resident. or
b) Defer the CGT on the basis you will be returning to Australian Residency before you sell it but when
you do sell there will be no exemption for the gain made while you were a non resident.
So the choice is pay the tax when you leave and be free of Australian tax on any gain you make while a non resident or defer the tax but widen the period of time you are exposed to Australian capital gains tax.

As your home will be an asset “connected with Australia” you will not be deemed to have disposed of your home by 104-160 if you decide to keep a home in Australia to return to and go overseas for longer than 2 years and lose your residency for tax purposes. This is assuming you have actually lived in the home as your main residence before you go overseas. You will have to elect for it to be your main residence otherwise section 118-192 deems there to be a disposal anyway, if it is first rented out after 20th August 1996. If you elect for it to be your main residence but rent it out during you absence the exemption will only last 6 years unless you move back in again. You will qualify for another 6 years each time you move back in. If it is not rented out the exemption from CGT is unlimited. Section 118-145. Note the disposal deemed by section 118-192 does not trigger a capital gain if the house had always been your main resident during the time you owned it but it will start the clock ticking on any gain from that date forward.
You may also have trouble if you are the trustee of your self managed superannuation fund as the trustee needs to be a resident.
Note:
The above is written for the small investor not companies or trusts and there are more complex rules if you have a significant investment in a foreign entity.

Yes Me

I am based on Bribie Island Road and also at Maroochydore. If you send your e-mail address to [email protected] I will send you some reading on Rental Properties and CGT and put you on our fortnightly e-mail newsletter list. These items will speak for themselves.

Julia

A self managed super fund is only taxed at 15% but can’t borrow money.

Otherwise consider a discretionary trust so you can choose each year who in your family gets the profits or capital gains. This is no good for negatively geared properties as the losses stay in the trust to be offset against other trust income. They cannot be offset against beneficary’s income. As long as the trust is discretionary the CGT discount can be carried down to the beneficiary.

Companies have a 30% tax rate but do not qualify for the 50% CGT discount. It is very difficult to get the money out of the company without ending up paying tax on it at the marginal rate of the shareholders and less flexability as to who gets the money. Losses cannot be transferred out of the company.

[email protected]