Moving to Australia

[MrPTSia]

Hi All,

I have a situation where I'm trying to create a structure that will be legal, best for tax purposes and simple.

At the moment I have my own home, which I'm selling because I'm moving to Australia. Yes, I have already gone through the process of weather I should sell it or keep it and rent it out. I'm selling.

I have a Family Trust.

I have an LTC Company with 2 other rental properties.

Because I'm moving to Australia, I will have no income to offset any loses made from the LTC. This essentially makes the LTC not worth while. I have no recovered depreciation owing on one of my properties. It was only build in August 2011 and I have only just moved to an LTC. The other property has recovered depreciation of $18,000, but I'm not worried about this property - it pays for itself.

The newly built property has a $515,000 mortgage. It's rented currently and is negatively geared.

When I sell my own Home I'll have almost $400,000 in the Bank.

I have found an account used as an Offset can not be linked to a mortgage used for Properties in a Company or a Trust.

I want to do the following:
- Move the newly built rental out of the LTC and move into my own name.
- Use the $400,000 as an offset against the Mortgage for the newly built rental

However, if there is a better way - I'm all ears

Thanks in advance!

MrPTSai

[KyronGosse]

Just to be clear your proposal is that you sell your home, keep one rental in the LTC and the newly built in your own name with an offset account?

My parents are going through the same thing at the moment as they want to be able to claim as much loss on their income tax in Australia.

The biggest thing I see with your idea is, what is the point in moving the property out of the LTC if you are only going to offset the interest in which case the property will likely start making money and you will only pay more tax. Wouldn't you be better working out how to use enough offset so that after your tax refund and depreciation, your property comes up cash flow neutral and stick the rest in a term deposit or another house?

Secondly you must be aware that when you go to Australia any rental properties you have in your own name will become liable for capital gains tax as you are now an Australian tax resident. Therefore if you were to sell your property within the next ten years (and even bigger tax penalties if within 1 year) then you are going to have to pay tax on that gain.

Thirdly Australia has the same depreciation system that NZ used to have, therefore if you claim depreciation, the ATO will claim the depreciation back when you sell it - unless you use some of the tricks investors have learnt over the years such as specifying that you are selling the land for x amount and the building for x amount on the S&P.

I would talk to your accountant and then find a good property accountant in Australia and tell them your situation see what they would advise first.

You could also try posting the same post in the Australian page of property talk, see what sort of responses you get there

[MrPTSia]

Thanks for your reply.

Yes, I'm selling my home, keeping one rental in the LTC and I want to move the newly built into my own name with an offset account.

I'll balance the offset so it will be cash flow neutral. Like you said, I do not want it to generate to much profit where I'll have to pay tax.

So, if my properties remain in the LTC the ATO will not have any jurisdiction?

Or if I do move the newly built property into my own name, can I claim loses and depreciation through the ATO?

I'm meeting my accountant and lawyer together tomorrow to sort out the best approach and structure. I also have access to PWC consultants in NZ & Australia. I will ask the appropriate questions.

Thanks for you help.

MrPTSai

[KyronGosse]

Your LTC is a NZ company trading in NZ so the ATO have no jurisdiction, however as soon as you become an Australian tax resident any property in your own name becomes part of your own personal taxable income so yes they do have jurisdiction over that, which means that yes you can claim loss and depreciation.

Check with your aussie accountant but I believe the Australian system may have a catch in there to.
As soon as you move the property into your own name and move to aussie this will be considered the value of the property as if it was a new purchase.

If you claim your losses and depreciation and then move back to NZ thus no longer being an australian tax resident, they might make you revalue your property and if the property has increased in value they may require you to pay tax and depreciation recovery on it. This would also apply if you were to change it back to another entity.