Those with investment properties in Australia might want to read this article thoroughly.....
New Aussie Tax Rules May Hit Singapore Investors
Straits Times
Date 07 Sep 2012
AuthorYasmine Yahya
Abolition of discount on capital gains tax for non-residents sparks concern
A MOVE by the Australian government to abolish a tax discount previously enjoyed by foreign property investors could have major implications for Singaporeans with houses Down Under, a tax expert said.
Previously, a non-Australian resident who bought and then sold a property in Australia paid a capital gains tax on only 50 per cent of the profits he made from the sale.
However, the government announced during its annual budget in May that it would remove the discount for non-residents, effective immediately.
The move, aimed at raising some A$55 million (S$70 million) in additional tax revenue by 2016, means non-residents will now be taxed fully on the profits they make from selling Australian property, said Sydney-based Baker & McKenzie partner John Walker.
Capital gains are taxed at the same rate as income in Australia, and real estate is the only type of investment asset on which the tax applies.
"The top marginal tax rate kicks in at A$180,000, so it's not a high threshold," Mr Walker told The Straits Times in Singapore yesterday on the sidelines of a tax conference.
"For most investment properties, if it's been a good investment, they'll be taxed at the top marginal tax rate of 45 per cent, where historically they would have had to pay only 22.5 per cent."
In announcing the move, the government had said that the discount was not necessary to attract investment from non-residents into real estate, which is immobile.
However, Mr Walker said his office has received a flurry of calls from clients across the region, including Australians living abroad, concerned about the sudden surge in the amount of tax they might have to pay if they sold their properties Down Under.
"If you were a foreign investor and you were looking for places to invest in, Australia's just become a lot more difficult," he said.
"Other countries may have better concessions available. New Zealand doesn't have a capital gains tax."
His advice to them: Hire a valuer to determine how much their property was worth on May 8. This is because any capital gains recorded up to the day the budget was delivered on May 8 would still qualify for the tax discount.
For example, say an investor had bought a house for A$100,000 some years ago, got a valuation saying it was worth A$150,000 on May 8, and then manages to sell it tomorrow for A$160,000.
That first A$50,000 of capital gains would still qualify for the 50per cent tax discount, whereas the additional A$10,000 increase in value since May 8 would be taxed fully.
To ensure that their pre-budget capital gains do qualify for the tax discount, however, investors should conduct their property valuation as soon as possible, Mr Walker said.
"If you do the valuation now, the tax office will respect it because the difference in value of the property between May 8 and now is probably zero, but if you try to do a historical valuation five years down the road, it won't look good," he said.
Property consultants said the government's move is unlikely to affect property prices or demand for property in Australia.
"Yields in Australia are high, with prospects of rental growth across sectors, which combined with a transparent, strong regulatory system enhance its attractiveness as an investment destination," said DTZ's head of national research in Australia, Mr Dominic Brown.
Mr Peter Thng, the executive director of Reapfield Property Consultants, added that the measure is unlikely to affect too many investors.
"The Australian market is not a speculative one, and a lot of investors buy and pass the property on to their kids. Unless you sell, this tax will not be an issue," he said.
yasminey@sph.com.sg
Source: Straits Times © Singapore Press Holdings Ltd.