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UK resident (born in Australia) = CGT question

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Newbie

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My son is a UK resident has been in UK for 15 years (born in aust.). He has inherited a property in Sydney which he wants to sell. 

1.  If he holds on to the property for 12 months will that reduce the CGT from 46% to 23%  (I suspect probate and all things inbetween, selling the property it will take 12 months).

2. This brings me to another question when does the 12 months start? From the date of death of the deceased or ?

3.This process is so complicated to include being taxed in both countries / will we need to use the functional currency option as he has no australian bank account and no australian tax file number?

4. Will he need to apply for a TFN?

thank you very much in advance for any help/advice given. Azzie

 

 

 

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Hi @azzie1610,

 

Thank you for reaching out to us. If your son is a foreign resident then he would be looked at for CGT. There are exemptions in place in relation to inheriting a property and being an Australian resident. The website advises - When someone dies, a capital gain or loss is generally disregarded when a property passes:

  • to the deceased person's executor or other legal personal representative
  • to the deceased person's beneficiary –- such as next of kin or a person named in the will
  • from the deceased person's legal personal representative to a beneficiary.

But this exception doesn't apply if the property passes from the deceased to a tax-advantaged entity (such as a charity) or foreign resident.

If you inherit a dwelling or other property after CGT started on 20 September 1985 and later sell or otherwise dispose of it, capital gains tax may then apply.

 

There is information via the link on how to determine market value and how the property needs to be reported. The 50% discount for foreign residents was removed or reduced on capital gains made after 8 May 2012 on taxable Australian property – see CGT discount for foreign resident individuals.

 

There is also a requirement for Foreign resident capital gains withholding. This applies to vendors disposing of certain taxable Australian property. A 12.5% non-final withholding is applied to these transactions at settlement. However, foreign resident capital gains withholding doesn't apply when the vendor disposes of either:

 

There are other rules in place in relation to when the deceased first owned the asset and other information prior to determining market value and cost base. The above information will need to be considered before determining reporting requirements. If your son needs to lodge in relation to the capital gains when he sells or disposes of the asset he can apply for a TFN whilst living outside of Australia

 

If you have other questions thereafter please post them here.

 

Hope this helps.

Regards,

Jodie2.

3 REPLIES 3
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Most helpful response

Community Support

Replies 2

Hi @azzie1610,

 

Thank you for reaching out to us. If your son is a foreign resident then he would be looked at for CGT. There are exemptions in place in relation to inheriting a property and being an Australian resident. The website advises - When someone dies, a capital gain or loss is generally disregarded when a property passes:

  • to the deceased person's executor or other legal personal representative
  • to the deceased person's beneficiary –- such as next of kin or a person named in the will
  • from the deceased person's legal personal representative to a beneficiary.

But this exception doesn't apply if the property passes from the deceased to a tax-advantaged entity (such as a charity) or foreign resident.

If you inherit a dwelling or other property after CGT started on 20 September 1985 and later sell or otherwise dispose of it, capital gains tax may then apply.

 

There is information via the link on how to determine market value and how the property needs to be reported. The 50% discount for foreign residents was removed or reduced on capital gains made after 8 May 2012 on taxable Australian property – see CGT discount for foreign resident individuals.

 

There is also a requirement for Foreign resident capital gains withholding. This applies to vendors disposing of certain taxable Australian property. A 12.5% non-final withholding is applied to these transactions at settlement. However, foreign resident capital gains withholding doesn't apply when the vendor disposes of either:

 

There are other rules in place in relation to when the deceased first owned the asset and other information prior to determining market value and cost base. The above information will need to be considered before determining reporting requirements. If your son needs to lodge in relation to the capital gains when he sells or disposes of the asset he can apply for a TFN whilst living outside of Australia

 

If you have other questions thereafter please post them here.

 

Hope this helps.

Regards,

Jodie2.

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Newbie

Replies 1

thank you very much Jodie2.  If my son holds on to the property in excess of 12 months  but sells it before 2 years of acquiring it will this not reduce the CGT from 46% to 23%? Or is there are caveat around this because my son is a foreign resident (the executor needs to file for probate, we don't envision that selling the asset will take place in under 12months of the deceased death). This was the deceased's main residence for the past 30 years (not sure if that helps our situtation).

 

 

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Community Support

Replies 0

HI @azzie1610

 

Thanks for getting back to us and for your patience.

 

As mentioned in our previous response, the 50% discount is generally not available to foreign and temporary resident individuals for assets acquired after 8 May 2012.

 

We suggest that you have a good read of the information on our website. If you would like us to take a closer look at your son's situation, you can request an early engagement discussion with us.

 

Good luck with it.