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CGT

Newbie

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I share my time between NZ and Australia but am a tax resident of NZ. When I purchased my property in Australia to stay in when I am here (I don't rent it out) I paid the 7% Foreign Buyers Duty on my property on top of the stamp duty. I hold a SCV subclass 444. I am now selling the property and have been told I will have to pay 12.5% of the sale price in Foriegn CGT. This is really going to dip in to my savings and make it hard with the costs when re-purchasing because I will be paying the 7% AFAD again. I will definitely walk away from the property out of pocket / less than what I paid for the house end the duties when first purchased once I pay the 12.5%. Are variations issued regularly or is it really hard to get one? I'd just like to be square, I don't need to make a profit but I feel disappointed to walk away from the property out of pocket. Thank you for any info. 

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ATO Community Support

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Hi @Allyb1

 

If you are not a resident of Australia for tax purposes at the sale of the property, you will be liable for and capital gains you make.

 

This does not mean you're liable on the total proceeds of sale. You calculate your capital gain using the following formula: capital proceeds (total sale) minus cost base.

 

Your cost base is made up of things like the cost of acquiring the asset, expenses related to the capital gain event, maintaining and increasing the value of the asset, and more. You can read more about elements of the cost base on our website. This means you'll only be liable for tax on the net increase in value of the property beyond the costs already incurred for it.

 

If this means the standard 12.5% will be too high for your tax liability, then you should consider lodging a variation. They're common enough that you can apply online for one. Smiley Happy The amount shows as a credit on your income tax return at the end of the year to reconcile the total tax payable once it's reported.

 

You can read more about calculating your capital gain, elements of the cost base, and variations to foreign resident capital gains withholding on our website.

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Newbie

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I am going to be using / needing all the proceeds from the sale to go in to a more expensive property. Hence it would be great to not have to pay 1/8 of the sale in tax. Many thanks for any help. 

Most helpful response

ATO Certified Response

ATO Community Support

Replies 3

Hi @Allyb1

 

If you are not a resident of Australia for tax purposes at the sale of the property, you will be liable for and capital gains you make.

 

This does not mean you're liable on the total proceeds of sale. You calculate your capital gain using the following formula: capital proceeds (total sale) minus cost base.

 

Your cost base is made up of things like the cost of acquiring the asset, expenses related to the capital gain event, maintaining and increasing the value of the asset, and more. You can read more about elements of the cost base on our website. This means you'll only be liable for tax on the net increase in value of the property beyond the costs already incurred for it.

 

If this means the standard 12.5% will be too high for your tax liability, then you should consider lodging a variation. They're common enough that you can apply online for one. Smiley Happy The amount shows as a credit on your income tax return at the end of the year to reconcile the total tax payable once it's reported.

 

You can read more about calculating your capital gain, elements of the cost base, and variations to foreign resident capital gains withholding on our website.

Newbie

Replies 0

Thank you Blake. Just to confirm. As a non resident / foreigner seller (kiwi) the 12.5% is only on the profit. Not all the actual total sale amount. I would have thought it would have been applied to the capital gain, based on the name of the tax. But professionals are even indicating that it will apply to to the actual sale price of the house. Which would see me walk away with less then what I paid for it. 

Thank you for your help! 

Newbie

Replies 1

Thank you Blake. Will my solicitor work through calculating my CGT before settlement and do we pay the determined amount to ATO or does my buyer send it to the ATO?  

ATO Community Support

Replies 0

Hi @Allyb1

 

Even though your tax will be calculated on any capital gains you make for this property, initially the purchaser is required to withhold 12.5% of the sale amount and pay it to us if the contract is $750,000 or more. However, if you're unlikely to make a capital gain or you've worked out the rate is too high you apply for a variation as @Blake has mentioned

 

When you do your tax return you'll declare your capital gain/loss and your actual liability will be worked out for your total income and you'll receive a refund if too much has been withheld (employment and amounts withheld by the purchaser). So it all balances out where you'll only pay tax on capital gains.

 

See our website about Foreign resident capital gains withholding