Selling Australian Property When you are a Non Resident

Question

I have two rental on the Gold Coast,one will have a capital gain,the other a capital loss,both properties have always made a loss.As I’m a New Zealander can these losses be used against the capital gain.
As New Zealand an Australia have double tax agreement what tax rate would I be taxed if I have to pay tax on CGT ( have received no income in Australia only
Repeat losses) hoping you can help.

Answer

I would just like to restate your circumstances to make sure I have a clear understanding.
You are not a resident of Australia for tax purposes. You have two properties in Australia that have never been your home.
You don’t have any other Australian income so each year when you lodge your tax return the losses you carry forward just increase.
Here is a link to our expat’s booklet http://www.bantacs.com.au/booklets/Expats%20and%20Australian%20property%20booklet.pdf as there is a lot in this you need to know about selling a property in Australia. For starters if they are going to sell for more than $750,000 you will lose 12.5% of the sale proceeds to the ATO until you lodge your tax return at which time your tax will be deducted and the balance refunded.

Now back to your question. Yes, the losses that you have accumulated over the years can be used. As these are losses from rent they are called revenue losses (the best kind). It is important that you sell the property that makes the capital loss first (or at least in the same financial year) as you can carry forward capital losses but you can’t carry forward a capital gain. So let’s assume you make a $150,000 capital gain on one, a $100,000 capital loss on the other and you have $20,000 in carried forward and current year revenue losses. Your tax calculation would look like this:

Capital gain $150,000
Less Capital Loss 100,000
———-
Total capital gain $50,000
Less CGT discount * 5,000
———-
Taxable capital gain $45,000
Less:
Carried forward Losses $20,000
Tax Payable on ———-
Carried forward Losses $25,000 x 32.5% tax rate as under $90,000 note tax rates are also in the expat’s booklet

*If you purchased the property that made the capital gain, before 8th May 2012 then you will be entitled to the 50% CGT discount on the capital gain up to that date if you get a valuation as at that date, valuers can do this retrospectively. After the 8th May 2012 non residents for tax purposes are no longer entitled to the 50% CGT discount. This is also discussed in the expat’s booklet.