Tax Advice for Non-Resident (Investment Property and Margin Loan)

Hi Team, long time lurker, first time poster here.

I want to access the brains trust for a some decisions I need to make regarding my current investments, don't let me down.

Context

I have just accepted a new job over in yanky-dom and so will be breaking my residency of Australia later this year. I currently have:

• an investment property which is slightly negatively geared, interest rate 3.13%, and
• a margin loan on a portfolio of stocks which is essentially negatively geared because I am at 100% participation in DRP, about 80% LVR, principal of ~$30k, interest rate of 4.97%.

Assumptions

I understand that upon becoming a non-resident, I will no longer qualify for the tax free threshold and hence for Australian sourced income the tax rate for non-residents starts at 32.5% except for dividends in which case, the "Non Resident Withholding Tax" for dividend income applies at a rate of 15% instead source.

With my investment property, the losses can be carried forward to a future tax year and consumed upon my return (read: all good, no action needed).

As I understand it, the same does not apply to my margin loan and share portfolio, essentially removing the benefit of borrowing for investment purposes (read: bad).

However, when one breaks residency with Australia, one may "deem to dispose" of ones non Australian taxable property (aka shares) essentially meaning you pay CGT on them as if you sold them on the day you left, but no longer have an obligation to pay CGT to the ATO if you choose to sell in the future, unless you become an Australian Resident again (which I do plan to), in which case, the price of the shares on the day you reenter becomes the new base price on future capital gains source. This, of course, is a risky strategy as if the price on re-entry is below price on exit, you would actually have to pay tax on your losses…yikes…however, depending on how bullish you fell, this line presents a comparable "tax-deduction-like" scenario for a margin loan portfolio, essentially;

Instead of:

• dividends & CGT are taxed and interest repayments are deductible

it becomes:

• dividends are subjected to the "Non Resident Withholding Tax" of 15% CGT becomes tax-free but interest repayments are no longer tax deductible.

This is categorically worse, as:

• you pay CGT when you leave without actually getting any money… increasing risk and forgoing investing that amount
• interest payments are front-loaded, once again increasing risk and forgoing investing that amount
• the rate is not exactly like-for-like as there is still "Non Resident Withholding Tax" on dividends (although this can be minimised/mitigated with a growth oriented portfolio or DRP)
• aforementioned risk of portfolio going down in value and having to pay tax on losses (which is essentially doubly bad because not only are you paying more money, but you would also have gotten a deduction on the losses otherwise so it is an even greater bad swing)

…buuuuuuut, depending on my risk appetite, it may still be better than the alternatives (see below)

Further, I have read in an unverified internet article that:

Once you become a non-resident for tax purposes, you are no longer able to negatively gear your sharemarket investments. In fact, you are unable to deduct any costs associated with your investment in shares, but you can add these costs to the cost base of your investment to reduce your future capital gains tax liability (if applicable).

source

This may actually swing the balance in favor of keeping the margin loan as the article implies the interest costs on the margin loan eventually become tax deductible, even potentially providing a CGT loss and tax refund upon returning to Australia. Unfortunately, I couldn't find any official guidance to this on the ATO website and am hesitant to go down this route without actually confirming.

I am generally bullish on the time frame that I intend to be away, (2-4 years), and hence expect to see a return on my portfolio purely outweighing my interest costs.

Question

So basically the question is, given that I am bullish, is the best course of action to foot the CGT bill on leaving Australia and the full cost of interest repayments, essentially forgoing a chunk of investments whilst I am away in order to keep my highly leveraged portfolio and multiply my expected gains, or would it be more effective (for reasons stated here or otherwise) to take a different option.

Alternatives

• re-gear my margin loan to be more tax effective (???)
• sell margin portfolio and put all money in offset account @ 3.13%
• sell down shares and pay back margin loan, but still keep initial principle in Australian share market