Capital Gain Tax Archives - Accounts NextGen

Returning native Australians warned for hefty tax traps

Returning native Australians warned for hefty tax traps

Many of the Australian migrants are waiting to return home in this coronavirus pandemic, this has been urged to give a though that their respective tax affairs need to be considered to avoid hefty tax bill on return. According to the Accounts NextGen, it is believed that Australians have to be given consideration towards a range of tax issues. Keeping in mind that there are tax nuances depending on the legal obligations along with the length of time spent overseas.

Furthermore, it is seen that around 40,000 Australians are at present registered with the department of Foreign affairs along with the Trafe to return home. Even if someone is living and working abroad for a relatively short period of time, it will still be required to pay a hefty tax bill when they return to Australia. It is important to acknowledge that the nature of the coronavirus pandemic also means that some of the migrants have been laid off so there are circumstances that are indicating the return could also be a stressful task for them. So, if they have planned for financial strategy throughout while returning from overseas then it can go a long way in overcoming a lot of financial pressure.

What’s more to know about the hefty tax traps in Australia?

In addition to this, the native Australians need to account for any of the shareholdings and the employee’s share schemes, particularly in the events of redundancy. It is crucial to understand that the cash in the offshore bank accounts along with the pension funds are the important factors here. The property is another key that needs to be considered. In some of the countries, the charge non -residents pay is a higher rate of transaction tax or capital gains on the profits from the investments in properties. Remember, if you have retained the property while you are abroad then you may need to be better to move back before you think to sell it off.

This scenario clearly applies particularly to those who have a former family home as the non-residents to sell the property. This set of people are now excluded form the CGT main residence exemption along with the related rule labeled as “Six-year absence”.According to the CGT discount on the sale of properties is unavailable for any period after 8 May 2012. If you are thinking about the investment properties that are already owned at the time they left the residential area then there will need to be an apportionment of the CGT discount to relevant periods. There is a similar apportionment agreement highlighted by Accounts NextGen that is applied for the periods between the date they people return to Australia.

The concept further explained 

It is also seen that the pension system in the legal terminologies such as in the provinces of the UK, is estimated to have 40,000 Australians who reside at any given point of time and it can also create an ill effect as consequences. Moreover, the people who have been a resident in Australia since ling and shifted to work in London (say), will have a high income and hence need to pay close attention to their respective pension savings and to transfer the funds back in Australia.

The Accounts NextGen further explains that another common situation is when the people have switched their respective tax residency and paid the taxes in another country is not a good thing. They may be able to claim the credit for option a foreign tax paid set upon their respective returns. But they can only file the claim if they have proper records and structures in one place. The considerations around the shares and funds will also be required specifically if someone has become a non-resident during the period they moved out.

The gist of the topic 

These types of investment schemes are generally treated under the possible criteria set by the CGT rules as having been sold at the market value at the same time the tax residency is triggered, deemed, and face losses. It is a piece of good news that there are no further Australian CGT issues if such assets are sold by a Non-resident. However, if they still own that property in Australia then the tax residency is resumed along with the set of investments. The result of which explains that the non-residents have to pay a hefty amount of the tax for their respective properties whenever they return back from overseas.

Families using Granny Flat arrangements will get CGT exemptions

Now all the families living in Australia who wish to care about the elder people (parents) using the granny flat arrangements will get exemptions in capital gains tax.

This rule was introduced by Treasurer Josh Frydenberg. This exception from the capital tax gains will be valid for the written granny flat arrangements in the variation, termination, or creation of that arrangement. This scheme is for those who take care of elders or disabled persons.

This announcement has been made before the Federal budget and the rules described in this announcement will come into effect from 1 July 2021.

This change has been made to make the lives of elders and disabled comfortable. There is a risk that all such persons can face whenever there is a breakdown in the family. More than 3.9 million pensioners along with 4 million disabled Australians will take benefits from this scheme. But if you have some commercial rent arrangement with some elderly or disabled person, you will not get benefits from this scheme.

Last year, this decision was taken to exclude all the CGT from several services that are applicable to the Granny Flat Arrangement. John Jeffrey (Super Australia tax & tax counsel) said that further favorable changes will be introduced in the upcoming Federal budget.

This scheme is for all those who take care of elders in their families. But if some relative is living in your home and you sell your home, in this case, you have to pay the capital gains tax for the gains you just made.

Such exemptions are very necessary for encouraging people to avoid charging rent and informal arrangements. With the help of this latest exemptions, people will build flat for their elderly and stay close with their old age family members.

Why you should keep record for Capital Gain Tax

You must keep records of every transaction, event or circumstance that may be relevant to working out whether you’ve made a capital gain or loss from a capital gains tax (CGT) event. Generally you need to keep your records for at least five years after the year when the CGT event happened.

Keeping adequate records will help you work out your capital gain or loss correctly when a CGT event happens.

Good records can also help your beneficiaries deal with the impact of CGT. If you leave an asset to another person, it may be subject to CGT if they dispose of it in the future. For example, if your daughter sells shares you’ve left her in your will, she will need your records to work out her cost base for the shares and how much CGT she has to pay.

You should also keep records for a net capital loss in a year, which you may be able to offset against a capital gain in a later year. (There’s no time limit on how long you can carry forward a net capital loss.)

Once you’ve offset the loss against a capital gain, you should generally keep your records of the CGT event that resulted in the loss for a further two years (for individuals and small businesses; four years for other taxpayers).

On this page:

  • Records to keep
  • It’s never too late

Records to keep

Your records must be in English (or be readily accessible in or translatable to English) and must show:

  • the nature of the transaction, event or circumstances
  • the date it happened
  • the parties to the transaction
  • how the transaction, event or circumstances are relevant to working out the capital gain or loss.

These are the kind of records you’ll need to keep:

  • receipts of purchase or transfer
  • details of interest on money you borrowed relating to the asset
  • records of agent, accountant, legal and advertising costs
  • receipts for insurance costs, rates and land taxes
  • any market valuations
  • receipts for the cost of maintenance, repairs and modifications
  • accounts showing brokerage fees on shares.

You should also keep records to establish whether you’ve claimed an income tax deduction for an item of expenditure. If you’ve claimed a deduction for an amount, you can’t also include the amount in the cost base of the asset.

It’s never too late

If you haven’t kept records of your CGT assets, or your records have inadvertently been destroyed, you can still do something about it.

If you bought real estate, your solicitor or estate agent may be able to give you copies of most of the records you need.

If you made improvements to an investment property – for example, if you built an extension – ask the builder for a copy of the receipt for payment.

If you bought shares in a company or units in a unit trust, your stockbroker or investment adviser may be able to give you the information you need.

If you received an asset as a gift and didn’t get a market valuation at the time, a professional valuer can tell you what its market value was at the relevant date.

If you lost your records in a natural disaster, we can help you reconstruct them.

The main thing is to get as many details as possible so you can reconstruct your records.


*News Source ATO –

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