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Re: Becoming a non-resident and disregarding capital gains/losses

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Hi,

 

Some great threads and information on this forum about this general topic (you guys rock!), but I haven't quite found an answer to my question yet in past threads.

 

I understand that if becoming a non-resident in regards to non-taxable Australian property you can either choose deemed disposal of your assets or to disregard capital gains and losses and that such assets become taxable Australian property until a CGT event or becoming an Australian resident again. It's also my understanding that if becoming a resident of a country with a double tax agreement with Australia (for example the USA), that disposal or sale of such assets while a resident of USA should not incur Australian Tax as per Article 13 of the Australia-USA DTA:

 

"(6) An individual who elects, under the taxation law of a Contracting State, to defer taxation on income or gains relating to property which would otherwise be taxed in that State upon the individual ceasing to be a resident of that State for the purposes of its tax, shall, if the individual is a resident of the other State, be taxable on income or gains from the subsequent alienation of that property only in that other State."

 

My question is then: if you become a non-resident of Australia and subsequently a US resident and dispose/sell assets later on, do you have to report this income to Australia or complete any Australian Tax filing (assuming you have no Australian sourced income)? Are the assets still considered Australian taxable property if changing residency to the USA considering the DTA?

 

Thanks a lot for the help!

 

 

 

 

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Hi @Vino_DD,

 

If you leave Australia you're taken to of disposed of capital assets for market value when you depart Australia. Capital gain or loss would be reported on your next return here. There are some instances where you can choose to disregard declaring the CGT event till a later date. However, the website advises - If you do this, your assets are taken to be taxable Australian property until the earlier of:

  • a CGT event happening to the assets (for example, their sale or disposal)
  • you again becoming an Australian resident.

The effect of this choice is that the increase or decrease in the value of your assets after you stop being a resident is taken into account in working out your capital gains or losses on those assets. You do not need to tell us what you decide – the way you prepare your tax return is generally sufficient evidence of your choice.

 

So if you're overseas when you sell/dispose of the capital asset, you will need to report this here. If you paid tax overseas, you can include a foreign income tax offset.

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Hi @Vino_DD,

 

If you leave Australia you're taken to of disposed of capital assets for market value when you depart Australia. Capital gain or loss would be reported on your next return here. There are some instances where you can choose to disregard declaring the CGT event till a later date. However, the website advises - If you do this, your assets are taken to be taxable Australian property until the earlier of:

  • a CGT event happening to the assets (for example, their sale or disposal)
  • you again becoming an Australian resident.

The effect of this choice is that the increase or decrease in the value of your assets after you stop being a resident is taken into account in working out your capital gains or losses on those assets. You do not need to tell us what you decide – the way you prepare your tax return is generally sufficient evidence of your choice.

 

So if you're overseas when you sell/dispose of the capital asset, you will need to report this here. If you paid tax overseas, you can include a foreign income tax offset.

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Thanks a lot for the info @Jodie_ATO!

 

I suppose something I am still curious about is that because the DTA between Australia and the USA states that when leaving one residency (Australia) and becoming a US resident, subsequent selling of property for capital gains shall only be taxed in the other state, in this case the USA. In this case, wouldn't there be no Australian tax to incur, and therefore  no need to have a foreign income tax offset, or anything to declare on a tax filing in Australia? (Or maybe I'm interpreting this incorrectly! Smiley Happy )

 

Thanks a lot!

ATO Community Support

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Hi @Vino_DD,

 

I appreciate the information you've provided, however, we can't advise or interpret the legislation. If you'd like to contact our early engagement team, they can advise you whether your CGT event is reportable here.