Bali Expat Forum - Bali Travel Forum

Hi,

We have just been told by our accountant that even know we delare income that we make from our villa to the Australian Taxation office that you are not allowed to Negative gear your losses ? You have to keep receipts for things like electricity , maintance, insurance & more and if we ever sell the property we can take that amount off any profit we make ? That is alot of info to keep hold of if we dont sell for 40 years.

Does not seem right ? Would love some advise on this topic ?

Thank you

Hi Sunshine.
The advice is similar to what we were told 3 years ago. To negative gear the property had to have a US$ value of 500,000 or more. What we were also told was that any expense could be accumulated as a tax off set so that any income derived from the property as long as it was less than the off set need not be declared to the tax office. Hope this helps.
Peter

Have a read through this:
http://www.ato.gov.au/large/content.asp ... /65779.htm

and go to the link on Foreign Source Income
http://www.ato.gov.au/individuals/conte ... /34783.htm

The way I understand it is:
If your expenses on the villa exceed your income on the villa (i.e. negatively geared), you make a 'foreign loss'. You can't deduct the foreign loss against your Australian source income. You can only deduct it against foreign income you make in the same category (i.e. the villa).

You don't put the foreign loss anywhere on your tax return - so you are not declaring either the income or the expenses. You have to keep all your records (including your calculation on how you got to a loss), so that in a later tax year - if you make a profit on the villa (positive gear), you can offset the prior loss(es) against that profit.

This is very similar to how it works if you have a business in Australia and it makes a loss. You can't deduct the business loss against income derived from another source - e.g. you have a business as well as a part-time job. You cant deduct the business loss against the income from the part-time job. The difference being that there is a place on the tax return to carry the loss forward.

Hope that's all clear as mud

freo

Hi,
Would love to get some advise. It seems that you own a villa in Bali. We are seriously considering purchasing a villa in Sanur. We are visiting in Sept with the intention of purchasing. We understand that this will be more of a future lifestyle thing rather than a money making venture. Any advise would be greatly appreciated.
Thanks

Welcome...

What kind of advise are you looking for?

Bert wrote:Welcome...

What kind of advise are you looking for?

Bert, Roy, Balilife, anyone who can tell me, I would like to buy a home/villa in Bali, I have read a lot of info on this site on purchasing property in Bali..(enough to confuse me), I think i would have to go the leasehold way (no sponsor etc). Simply, I ask, Where do i begin ?

which estate agent/s would you recommend ?
How does it work in Bali, do you put in an offer, subject to ?, what is the usual
settlement time frame for purchase of property.?

Fearful of taking my first step,

Thankyou.

Or you just don't declare the Villa you own in Bali and keep the rental return in an account up there that is not linked to any Australian account.......

Cheers
Ken

For my part, it’s a pleasant irony reading a sting of posts devoted to tax scheme write offs on property that cannot be foreign owned.

Roy, my mistake, im not looking for a tax right off, i have asked my question under the incorrect heading, i was reading about property buying in bali and came into this heading to ask my question.

no, not a tax right off..........just wanting to buy a home in Bali.

Roy wrote:For my part, it’s a pleasant irony reading a sting of posts devoted to tax scheme write offs on property that cannot be foreign owned.

Haha Roy, is that a carefully worded mistake??

Yes it is a little amusing that foreigners cannot own land so I will have a little chuckle when I do my next tax return and can correctly put that I do NOT own property in Bali, I only rent for a considerable length of time
In my humble opinion I found that the 30-40 year lease to be a good thing for me as it still allows the Balinese to get the land back when i am gone and also I will have no problems down the track when the Indonesian Government realises it has put land out of the reach of Balinese by selling "Freehold" to overseas investors and decided to maybe restructure the rules....


Cheers
Ken

I guess it’s clear enough that IMHO, your approach Ken, is the only approach. So, please allow me to throw some kudos your way.

Odd as it may seem, earlier today a courier delivered my voting card for this Wednesday’s gubernatorial election. This is the second time in the last year that I have been issued a voting card from my regency, and it will also be the second time that I will ignore it, aside from it becoming yet another souvenir.

Property ownership and voting rights are nothing to be taken for granted, IMHO. Once abdicating those rights, (speaking of Balinese), and once regarding them as taken for granted, (as with westerners), the Balinese will pay the price in future generations.

I have three of the best reasons on earth to do what I can to insure neither ever happens.

Roy, tad confussed here , what are you saying exactly ?

Are you against foreigners buying a home in Bali ?

Leasehold which reverts back to Indonesia anyway ?

Chilli I think you find that yes, Roy ( and I ) are against outright ownership of Bali land by a foreigner.
The outrageous prices asked for land in Bali can be put down to purely investor greed and what chance does a Balinese person have to own a piece of there Island unless is handed down from family?
And if the family has only one piece of land but numerous heirs then how are they going to keep there place in Paradise ?

Forgive me if that grates on some peoples ideals but I stand by what I originally posted and that is..
I don't mind renting ( or Leasehold if you want to call it that) for an extended period because it still remains in control of the original Balinese landowner.
If I get married to a Balinese lady ( and that may be on the cards) then we will purchase land freehold in her name so when I am gone , she and her son(s) will benefit from my Western wealth ( small that it is ) and she will then be able to hand it down to her family.

But the way the current investor land grab is going , I had better be quick

Cheers
Ken

From what I see, land in bali is still quite cheap by domestic standards - ie when compared to surabaya and jakarta - but I know that's not exactly comparing apples and apples. But I will also add that just like in surabaya, in bali you'd probably find that even without foreign holders of land, there are enough indonesians (from all ethnicities - but again largely chinese indonesian) buying land for development, speculation, etc to keep prices elevated beyond the reach of many balinese. I met the owner of the grand kuta on friday, he is from surabaya - here he has two condo-hotel projects (cosmopolis and the metropolis) that he owns.. In addition to the grand kuta, he owns several other large pieces of land for development in bali, he's not a foreigner - he's chinese indonesian. Another family friend, who's father developed large areas of east surabaya (but originally from singaraja), told me the other day when I was in the airport, he's got just under 20 hectars of land near hotel nikko, he hasn't figured out what to do with it - again, chinese indonesian. God only knows if/how much land in bali large national developers like darmala (graha), bukit darmo, pakuwon and ciputra hold (again chinese indonesian families) - but if it's like elsewhere in indo, then it's thousands upon thousands of hectars..

I just read a paper from lippo group which now has an indonesian property reit traded in singapore (through a complex structure), it correctly cites indonesia as having the most 'undervalued' land in the region, but yes I agree, unfortunately it is still priced beyond the means of most local indonesians.

Ct

The tax situation asked about by the original poster has nothing to do with ownership. In Australia we are supposed to declare any income earned from a foreign source. You don't have to own something to get income. For example, I had a long term lease on a villa in Spain. I sub-let the villa. My net profit was foreign income.

In Australia, for property within Australia that is an investment property, you can offset your expenses against the income so you are taxed on the net income after expenses.
If your expenses exceed your income it is called negative gear (the subject of the post). You can reduce your taxable income from other Australian sources (i.e. your job) with the negative gear against the investment property.

However you can't do this with a foreign investment property.

It seemed the original poster was asking if their tax agent's advice was correct in that they couldn't negative gear for their villa. That is correct. So you can't get a tax write off against a villa you run at a loss in Bali.

However they should only be declaring their net income after expenses. If you happen to make a loss against the villa the net income is negative and no income is declared.
That loss can be offset at a later date if you make a profit on the villa. But it can't be offset against other Australian income.

gtrken, I wholly agree with your position re foreign ownership. Just be aware that the question asked by the tax office is not just 'do you own property over xxx value?' but 'do you have income from a foreign source, any other source' etc etc.

Hi All,
I am at a complete loss as to why any investor would knowingly purchase any property in any country without having complete ownership of said property from day one. This to me does not make any financial sense at all. Why wouldn't the investor purchase property ( better still equities) in their own country and use that capital to fund any overseas holiday or venture they wish to undertake. Negative Gearing is a loser's way of investing as it still costs you -the investor- your money to make up the shortfall. Truly wealthy people negative gear nothing! If you sell your own property in your own country and invest the money wisely you could live quite luxuriously in Bali possibly without even drawing down on the capital, simply just living off the interest generated by the lump sum investment.

Cheers Harro.