St_Regis_Singapore

Aussie Expats Abroad: Still Think you can Refinance and Have the Homeowner CGT Exemption?

With the record-breaking cold days in Sydney I thought it time to explore my global neighbourhood and head to Asia for a week of part-holiday-part-work.

That’s one of the marvellous benefits of working for yourself: the ability to explore the world without the shackles and gilt of a corporate machine. I will keep thorough notes of course so Mr. or Mrs. ATO knows I have been working…

Today in Singapore I hosted my clients at the stunning St. Regis Hotel, where I caught up with 3 expat clients to understand how we can work together over the next 12 months.

Two common themes came out of my time today:

  1. The removal of the Capital Gains Tax (CGT) exemption for owner-occupied residences for Australian expats living abroad; and
  2. The increasingly difficult (impossible) ability to refinance Australian properties or purchase new ones…
The recent changes in CGT concessions has been a tough pill to swallow. I have been suggesting clients engage their international accounting expert to understand the impact for their homes back in Australia. 
 
I will use these results in partnership with their accountant to understand how we best move forward. Philosophically, I am a “buy and hold” guy though feel this is a moot point for many of my clients.
 
One result from the CGT changes is that I believe many Aussies living abroad who have potentially doubled their money in the last property boom will be rushing to the market to sell their homes (yay for all my Real Estate friends out there).
 
The challenge, however, it’s a buyers’ market and with the banks front-running the Royal Commission and APRA finalising their macro-prudential changes in the Australian lending market borrowing capacity has evaporated significantly.
 
This presents a difficult scenario for Aussie expats: excess stock in the market and buyers with less to spend. I am suggesting clients (and friends) understand what potential CGT is payable after the June 2019 cut off and to think, perhaps, in this market it might be worthwhile waiting to the market stabilises further, pay some tax, and look at selling at a later date. 

 

Therefore, prepare a cash-flow analysis looking at CGT payable versus higher property prices at a later date. You may be surprised.
 
Secondly, and indeed the most contentious, is the shrinking pool of lenders that I have on offer for Aussie expats. For those who have yet to refinance (mostly from interest only loans that have yet to expire), I would encourage you to move quickly.
 
There are very few lenders in the market that are supporting Aussie expats abroad.
 
My concern in the medium term, however, is that the few lenders that remain in the market are going to turn off the tap keeping many locked into higher interest rates and 25 years to pay off a 30 year loan. Not a pretty outcome. 
 
Imagine for a moment paying an AUD 1 million dollar loan at an interest rate in excess of 5%? Not a pretty outcome…
 
Living abroad as an expat is one of the most rewarding opportunities professionally. With all the comforts that an expat role provides, I encourage you to make sure your house is in order for when you return, and partner with a wealth management and mortgage broking processional that has your best interest at heart…
 

1. Don’t panic-sell your Australian property, understand the CGT impact and if its not significant, look at selling in a more buoyant market due to the potential for excess supply in the market; and

2. Banks front-running the Royal Commission and APRAs macro-prudential policies have eroded borrowing power for those domiciled abroad and living in Australia, with less borrowed funds placing downward pressure on prices. Now is a good time to act on any lending requirements you may have.

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