The following case study relates to a real life example of how we helped
Neil and Juliette, achieve the following results

$24,119

In income tax savings

$94,703

In UK penalty tax savings

$118,882

In total tax savings

Whilst this is an actual example, all personal details have been changed, for confidentiality purposes.

Our Clients

Neil and Juliette moved to Australia from the UK in 2011. They are both professionals aged 46 and 48 years respectively and earn a family income in excess of $300,000.

They were looking for an accountant who was familiar with UK expatriate tax issues as they owned two properties in the UK which they were lodging tax returns for and were unaware how this impacted their Australian tax affairs.

Neil was in the process of transferring his two UK pensions to his Australian super fund with the intention of establishing a self-managed super fund to rollover their entire super funds into.

They also wanted to purchase a new main residence in Australia, and wanted to understand their options. That’s when they found Tax Effective.

The problems before we got involved

  • Neil and Juliette were unaware that they were legally required to declare their UK properties in their Australian tax return and claim a tax deduction on their UK property shortfall
  • They were in the process of selling one of their UK properties and use the proceeds as a deposit to purchase a property in Australia, but didn’t understand the capital gains tax implications of doing so
  • Neil had two UK pensions valued at $582,070 and $172,187 that he was transferring to his super fund and was unaware that his Australian fund could not accept the larger fund transfer as it was in excess of the 3-year concessional contribution limit of $450,000 at the time
  • He was also unaware that if his UK pension provider transferred the larger fund amount, not only would his Australian fund be unable to accept the transfer, his paying UK fund would be unable to reverse the transaction and accept the funds back, leaving the funds in limbo
  • If Neil rolled over his Australian super which held the UK pension amount into a self- managed super fund, this portion would have been deemed an unauthorised payment and taxed at 55% because the SMSF would not have had QROPs approval with the UK tax office (HMRC)

How Tax Effective helped Neil and Juliette

  • We prepared Neil and Juliette’s Australian tax returns and ensured they claimed a tax deduction on the UK property shortfalls and received a tax credit on the non-resident landlords tax withheld on their rental income in the UK
  • We helped them understand the capital gains implications on the sale of their old main residence in the UK, so they knew how much the net proceeds after tax would be to plan their Australian property purchase
  • We ran multiple property scenarios with them, so they could understand all their property options and make an informed decision on whether to buy a new main residence or purchase investment properties instead
  • We helped them work out their borrowing capacity and provided them with advice on how to structure their home loan from a tax point of view
  • We transferred Neil’s $172,187 UK pension into his existing super and advised him to cease the transfer of his $582,070 UK pension
  • We established a self-managed super fund and successfully obtained a QROPs approval from the UK tax office (HMRC) before we rolled over all their super funds into their SMSF

The result so far

Neil and Juliet have achieved the following benefits over the last 3 financial years

  • By declaring their UK properties in their Australian tax returns, Neil and Juliette received a combined tax saving of $24,119
  • We saved Neil $94,703 in unnecessary UK penalty taxes that he would have been payable if their self-managed super fund did not have QROPs approval from the UK tax office (HMRC)
  • By halting the transfer of Neil’s $582,070 UK pension, we ensured that the funds would remain safely invested in the UK
  • Neil and Juliette were able to make an informed decision about their property options and purchased a new main residence in Sydney’s inner west
  • We structured their home loan to ensure they could secure significant taxation benefits if they decided to turn their new main residence into an investment property in the future
  • We negotiated a 1.3% interest rate discount on their home loan with a major bank, reducing their loan interest repayments and accelerating their principal debt reduction

Post becoming clients

We meet with Neil and Juliette once a year to prepare their tax returns and analyse their data to determine whether they are in a position to look at further tax planning and investment opportunities.

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