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The 2012 Australian budget included two significant changes affecting Australian expats:
We have summarised the important details and implications of these budget changes for reference.
As of 8th May 2012, non-resident owners of property in Australia will no longer be eligible for the 50% CGT discount on property held for longer than 12 months. However, if a market valuation is obtained as at 8th May 2012, the tax discount will remain for capital gains prior to this date.
Doing nothing is not an option; it is essential that any Australian expat affected by this budget change obtains a formal valuation for all Australian property interests. A formal valuation can be made by a licensed Australian valuer or through the bank as part of a mortgage package. Considering the increase in Australian property value in recent years, the consequences of failing to arrange a valuation could prove to be very expensive.
If a non-resident property owner were to return to Australia and be resident when selling the property, it appears that the 50% discount will still apply. However, this is not written into law and so the sensible action to take right now is to apply for a valuation as soon as possible.
It is not totally clear what level of tax will be applied to any capital gains if an investment property is sold without having obtained a market valuation. The wording of the budget suggests that all entitlement to the CGT discount would be lost which would be a serious tax burden. This emphasises the importance of arranging a valuation as soon as possible.
We are now in August 2012 and, although there does not appear to be a stipulated deadline for obtaining the valuation, the budget does state that the valuation should be as at 8th May 2012. There has been some feedback coming in in certain cases about a lack of sales data for similar properties in similar areas for May 2012, which may cause valuers to become reluctant to give a valuation. This only serves to reinforce the advice to get any Australian property valued as quickly as possible.
If you need assistance or advice on issues relating to the CGT discount or obtaining a valuation, contact our specialist Australian financial team.
The government has used the budget to deliver a double hit to Australian expats by increasing tax on income from Australia. As of 1st July 2012, the starting rate for non-residents increased by 3.5% to 32.5%, this will then be increased by additional 0.5% for 2014.
If you are a foreign resident for the full year, the following rates for 2012-13 will apply from 1 July 2012:
|Taxable income||Tax payable on this income|
|0 – $80,000||32.5c for each $1|
|$80,001 – $180,000||$26,000 plus 37c for each $1 over $80,000|
|$180,001 and over||$63,000 plus 45c for each $1 over $180,000|
We strongly recommend that Australian expats in Asia affected by these budget changes make arrangements for a review of all Australian-sourced income and assets.
We have a summary update document available as a Pdf; you are welcome to email us at firstname.lastname@example.org for a copy. If you have any specific concerns about the impact of the budget changes on your own circumstances, please feel free to contact us for professional advice. One of our experienced Australian support services team will be available to assist you.
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