Ask Ban Tacs Question
I am an Australian who has lived abroad for close to 20 years. I have a property that I own in Thailand that I would like to keep when I return to Australia once I repatriate.
As the yield on property in Thailand is far greater than in Australia (8-10%), I am wondering how do I continue to keep the property, rent it out, and bring the income back into Australia to help fund my retirement in Australia. What are the tax implications and how do I minimize these?
I also wanted to clarify the CGT on my Australian Share portfolio. Although I am fairly certain I am exempt from any CGT from the sale/trading of shares, what happens when I repatriate? Do I need to sell the portfolio before I arrive, then re-enter the market once I am an Australian resident for tax purposes again?
Your thoughts/knowledge are greatly appreciated.
Answer
Your Thailand house and shares listed on the Australian share market are not “taxable Australian property” so Australia has no right to tax the capital gain or income from them if they are owned by a non-resident. For most Expats the only asset the Australian government continues to have the right to tax is real estate situated in Australia.
Once you become a resident of Australia again Australia has a right to tax your world wide income and capital gains from that date. For CGT purposes the cost base of your assets is the market value at the date you became a resident for tax purposes, which would be the date you arrived back in the country with the intention of making it your home.
There is only one catch that bothers me. Did you own any of these assets before you left Australia? If you did then you are supposed to pay CGT on any gains up to the market value when you left the country. If you didn’t do this Australia continues to have the right to tax the gain on those assets. Reference section 104-160 ITAA 1997 https://www.ato.gov.au/law/view/document?docid=PAC/19970038/104-160
So in direct answer to your question. You do not have to sell the portfolio just record the market values when you arrive in the country. From then the dividends will be included in your tax return and you will be entitled to claim franking credits. Regarding the rent from Thailand, it is income in your Australian tax return and you would be entitled to all the tax deductions that an Australian rental property would qualify for ie management fees, repairs, insurance, interest, rates and building depreciation if it was built after 16th Sept 1987 and you can get a quantity surveyor to give you the original building costs. The burden will be translating all these expenses into Australian dollars. Technically you are supposed to use the exchange rate at the time the expense is paid or the rent received but in practice the ATO accept the June or December rate. You will be entitled to offset any tax you have had to pay in Thailand against the tax you pay in Australia so you are only taxed once. But Australia will not refund any Thai tax you have not needed to use to cover your Australian tax. If you need more tax deductions consider superannuation contributions as the tax concessions in retirement are very effective and you can claim a tax deduction for up to $27,500 in contributions per year (includes any made by your employer) You will also be entitled to make even more contributions to catch up on the caps you have not used in the last few years though there are a few restrictions so seek advice from your super fund before you contribute and make sure your income is high enough to utilise the tax deduction otherwise it is better saved for future years. These contributions will be taxed at 15% (30% if your adjusted income is over $250,000) going into the fund so you need to be sure you are deducting them against income that will be taxed at higher than that. Here is a link to a blog for further reading. https://bantacs.com.au/Jblog/how-to-make-your-own-super-contributions/#more-636
