Saturday, July 25, 2020

The 2014 removal of the 50% LTCG discount on Australian property

Im wondering how the Australian government feels about their 2014 decision to abandon aussie expats living and working overseas with the ATO removal of the 50% Long Term Capital Gains discount for non residents.....(yes removed even for Australian citizens that are expats).

Im not sure it made much press onshore at the time as house prices were going up.....but now that they are falling and with a low $A.......Aussie expats have no interest in investing in Syd/Melbourne investment properties.....its just not a viable option.

With the removal of the 50% LTCG discount its means that you pay 38% MINIMUM tax on all capital gains.

So if you get 8% return on stocks here in the USA.....(annual average) then you would need to get 13% each year in Australian property in order to have the same after tax return........

Or put it this way...... lets say you buy $1m in Australian property and $1m in USA stocks in 2020 and then sell in 8-10 years when it doubles.

With Australian property you would get $620,000 in profit after paying $380,000 in tax.

If you invested in USA stocks and paid 20% capital gains you would get $800,000......paying only $200,000 in tax eg paying $180,000 less tax than investing in Australian property.

This is why i tell non resident Australian expats to NOT INVEST IN AUSTRALIAN PROPERTY ever since they change the rules in 2014.

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