ntowler Posted November 11, 2013 Share Posted November 11, 2013 Hi, I imagine a lot of people still have their UK house and rent it out while in Oz, so I hope someone can give me a bit of advice. My house in the UK made a loss over the first year, so no profit to pay tax on in the UK or Oz, good so far. Last year I did make a profit, but not enough to offset the previous loss, so no UK tax liability again... However, can anyone advise... For my Aussie tax return, do I need to declare the profit I made this year - even though I have not made an overall profit from that 'business' or is it my tax liability from the UK that I need to declare? I think at current rates it will be a couple of years before the loss is exhausted so this is something I will need to deal with for a while... If anyone can give me some clear advice that would be great, else can anyone recommend a tax advisor in Melbourne (City or eastern burbs prefferably) who has helped them with this, that would be next best. I have a BN136 Permanent Resident visa and I'm resident for tax purposes. Thanks for reading my post. Neil Link to comment Share on other sites More sharing options...
fourcorners Posted November 11, 2013 Share Posted November 11, 2013 It all depends on what visa you have. If you have a 457 visa or some other Temporary visa, then you do not have to declare any foreign income on your Australian tax return. If you are a permanent resident, then yes you do have to include your UK property on any Australian tax return. I am surprised it will take you several more years for the property to turn a profit if you are renting it full time. Even in our first year of renting our house out, and it was empty for 3 months while we found a tenant, it still made a profit. Just make sure you're not including your capital repayment on your mortgage as a 'loss', it is only the interest on the mortgage which can be viewed as an expense (sorry if I'm pointing out the obvious!). Link to comment Share on other sites More sharing options...
Alaska Posted November 11, 2013 Share Posted November 11, 2013 GMTax (Alan from Go Matilda) gave me some good advice for my tax returns last year. Yes - it will depend on your visa. We are on a 457 didn't have to declare the UK income. Link to comment Share on other sites More sharing options...
fensaddler Posted November 11, 2013 Share Posted November 11, 2013 We've used the accountants Saward Dawson in Blackburn for our tax returns and they have given us sound advice, and appear to understand migrant tax positions on various visas. Link to comment Share on other sites More sharing options...
Alan Collett Posted November 11, 2013 Share Posted November 11, 2013 Are you having to complete a UK tax return each year as well as an Aus tax return? Best regards. Link to comment Share on other sites More sharing options...
Rupert Posted November 11, 2013 Share Posted November 11, 2013 Hi, I imagine a lot of people still have their UK house and rent it out while in Oz, so I hope someone can give me a bit of advice. My house in the UK made a loss over the first year, so no profit to pay tax on in the UK or Oz, good so far. Last year I did make a profit, but not enough to offset the previous loss, so no UK tax liability again... However, can anyone advise... For my Aussie tax return, do I need to declare the profit I made this year - even though I have not made an overall profit from that 'business' or is it my tax liability from the UK that I need to declare? I think at current rates it will be a couple of years before the loss is exhausted so this is something I will need to deal with for a while... If anyone can give me some clear advice that would be great, else can anyone recommend a tax advisor in Melbourne (City or eastern burbs prefferably) who has helped them with this, that would be next best. I have a BN136 Permanent Resident visa and I'm resident for tax purposes. Thanks for reading my post. Neil Do you need to rethink your business model? How are you making all these losses on a rental property with such low interest rates in the UK? My mortgage interest is about £150 a month on £200k mortgage, I know I have a great rate but still y must be charging very low rent not to cover your costs? Have you checked the market rates lately? As permanent resident, you need to declare your full income and expenses on your Australian tax return. Link to comment Share on other sites More sharing options...
Chortlepuss Posted November 11, 2013 Share Posted November 11, 2013 It is easy to technically be seen by the ATO as making a profit when you are making next to no profit or loss. Our mortgage is nearly paid off, the interest proportion is piddly, it's nearly all non claimable capital repayment and the house in excellent condition so very little maintenance. We 'make' about one hundred quid a month (rent - mortgage) - our profit is seen as eleven hundred and we are taxed on that less expenses. If I was planning to stay in Oz long term then it would be sensible to re-mortgage, but as it is, I'm returning to a mortgage free house. Expensive business though - especially now work is hard to find in Brisbane.. Link to comment Share on other sites More sharing options...
Rupert Posted November 11, 2013 Share Posted November 11, 2013 It is easy to technically be seen by the ATO as making a profit when you are making next to no profit or loss. Our mortgage is nearly paid off, the interest proportion is piddly, it's nearly all non claimable capital repayment and the house in excellent condition so very little maintenance. We 'make' about one hundred quid a month (rent - mortgage) - our profit is seen as eleven hundred and we are taxed on that less expenses. If I was planning to stay in Oz long term then it would be sensible to re-mortgage, but as it is, I'm returning to a mortgage free house. Expensive business though - especially now work is hard to find in Brisbane.. It is not technically a profit, it is a profit. Sometimes people confuse their cashflow with the profit. They think because they have moved money from their current account to pay off the mortgage account that it is relevant to profit / loss but it is not. Overall wealth is unchanged by transferring money from one account that is in credit to another that is in debit. Only the interest charged by the mortgage lender represents a change in the overall wealth, i.e. when they add on interest, you suddenly owe more. And therefore this is the profit / loss that is relevant to tax. Link to comment Share on other sites More sharing options...
wolvesaussie Posted November 11, 2013 Share Posted November 11, 2013 I was speaking to an Accountant in the pub about this (so maybe not the best advice), he said if he was me he would be claiming the annual flight back to the UK as an expense on Tax. It is true I plan to check on the house and do maintainance and such when I am over there, this is very interesting prospect. Anyone done that? Link to comment Share on other sites More sharing options...
Chortlepuss Posted November 11, 2013 Share Posted November 11, 2013 I was speaking to an Accountant in the pub about this (so maybe not the best advice), he said if he was me he would be claiming the annual flight back to the UK as an expense on Tax. It is true I plan to check on the house and do maintainance and such when I am over there, this is very interesting prospect. Anyone done that? My accountant said no way if you were spending any amount of the time on holiday. So it would have to be a short trip at a guess .... I would love to know more about this though, and what the rules are for flights for work - 60% of my time in the UK was due to work commitments (UK not Australian) - is this any way claimable? Link to comment Share on other sites More sharing options...
Alan Collett Posted November 11, 2013 Share Posted November 11, 2013 I was speaking to an Accountant in the pub about this (so maybe not the best advice), he said if he was me he would be claiming the annual flight back to the UK as an expense on Tax. It is true I plan to check on the house and do maintainance and such when I am over there, this is very interesting prospect. Anyone done that? Ask the accountant to put it in writing - and then check whether s/he has insurance available in the event that you are subject to a tax audit! Best regards. Link to comment Share on other sites More sharing options...
Alan Collett Posted November 11, 2013 Share Posted November 11, 2013 PS. Note that the OP has a class BN, subclass 136 visa. This visa was phased out yonks ago, so it is quite possible that he has been in Australia for several years and accrued losses on the UK rental property when UK interest rates were much higher than they are today. Link to comment Share on other sites More sharing options...
Alan Collett Posted November 11, 2013 Share Posted November 11, 2013 PPS. To Neil (the OP): I'm in Melbourne, if you want to discuss on the phone. That said, I'm actually at Melbourne Airport at the moment, and will be in our Sydney office for the next couple of days - if you'd like me to call you please feel able to send a PM or email to me (click on my name to the left of this post) with your full name and phone number/s. Link to comment Share on other sites More sharing options...
wolvesaussie Posted November 11, 2013 Share Posted November 11, 2013 Not true then ? thought it sounded bit to good. Link to comment Share on other sites More sharing options...
Alan Collett Posted November 11, 2013 Share Posted November 11, 2013 PPPS. Re deducting travel costs associated with a rental property: http://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties---avoiding-common-mistakes/?default=&page=6 Link to comment Share on other sites More sharing options...
Rupert Posted November 11, 2013 Share Posted November 11, 2013 I was speaking to an Accountant in the pub about this (so maybe not the best advice), he said if he was me he would be claiming the annual flight back to the UK as an expense on Tax. It is true I plan to check on the house and do maintainance and such when I am over there, this is very interesting prospect. Anyone done that? Seriously dodgy. Link to comment Share on other sites More sharing options...
Rupert Posted November 11, 2013 Share Posted November 11, 2013 PS. Note that the OP has a class BN, subclass 136 visa. This visa was phased out yonks ago, so it is quite possible that he has been in Australia for several years and accrued losses on the UK rental property when UK interest rates were much higher than they are today. I took my mortgage out in 2008 but I still pay that very low interest rate. I still think that if the OP is accruing losses, they should look at their business model, be it financing, rent or anything else. Link to comment Share on other sites More sharing options...
fensaddler Posted November 11, 2013 Share Posted November 11, 2013 Are you having to complete a UK tax return each year as well as an Aus tax return? Best regards. If that's to me, the answer is yes. No choice but to do so as a 457. Link to comment Share on other sites More sharing options...
fensaddler Posted November 11, 2013 Share Posted November 11, 2013 Do you need to rethink your business model? How are you making all these losses on a rental property with such low interest rates in the UK? My mortgage interest is about £150 a month on £200k mortgage, I know I have a great rate but still y must be charging very low rent not to cover your costs? Have you checked the market rates lately? As permanent resident, you need to declare your full income and expenses on your Australian tax return. Lucky you! Before I left the UK our mortgage interest was about £130 monthly. We did the right thing and advised our bank (First Direct) that we intended to rent out the property and they told us they could no longer offer us a mortgage. So we were forced into a buy to let mortgage costing £430 a month. Who says honesty pays? And that's how you can make next to no money on a rental... Link to comment Share on other sites More sharing options...
ntowler Posted November 11, 2013 Author Share Posted November 11, 2013 Thanks to all for the replies, but it is the point of whether I can 'use' my carried over loss to wipe out this year's profit - so far the UK tax office says overall I have made no profit yet, hence not liable for tax... Last year I could not claim my loss against Oz tax and this year I made a profit... Do I need to declare that profit even though I'm still in overall loss? Like Fensaddler I'm not on a very favourable rate, and I had to pay for some hefty repairs to get the place ready for renting, and it was empty most of the first year, hence the loss, now it is in profit, but on that business - as the tax office in UK see it - I'm still running a loss, just worried the ATO will not see it that way and hit me for tax. Cheers Neil Link to comment Share on other sites More sharing options...
Alan Collett Posted November 11, 2013 Share Posted November 11, 2013 Thanks to all for the replies, but it is the point of whether I can 'use' my carried over loss to wipe out this year's profit - so far the UK tax office says overall I have made no profit yet, hence not liable for tax... Last year I could not claim my loss against Oz tax and this year I made a profit... Do I need to declare that profit even though I'm still in overall loss? Like Fensaddler I'm not on a very favourable rate, and I had to pay for some hefty repairs to get the place ready for renting, and it was empty most of the first year, hence the loss, now it is in profit, but on that business - as the tax office in UK see it - I'm still running a loss, just worried the ATO will not see it that way and hit me for tax. Cheers Neil Hello again Neil. As a permanent residency visaholder you can negatively gear UK property - ie offset losses on your UK property against your Australian assessable income, thereby reducing your tax liability in Australia. It might be that you are in fact due a tax repayment for 2012, and should be lodging an amended 2012 Aus tax return? Best regards. Link to comment Share on other sites More sharing options...
Rupert Posted November 11, 2013 Share Posted November 11, 2013 Lucky you! Before I left the UK our mortgage interest was about £130 monthly. We did the right thing and advised our bank (First Direct) that we intended to rent out the property and they told us they could no longer offer us a mortgage. So we were forced into a buy to let mortgage costing £430 a month. Who says honesty pays? And that's how you can make next to no money on a rental... That would be a pretty low rent for UK, so still not that hard to break even surely? And I also was with first direct. Link to comment Share on other sites More sharing options...
fourcorners Posted November 13, 2013 Share Posted November 13, 2013 Thanks to all for the replies, but it is the point of whether I can 'use' my carried over loss to wipe out this year's profit - so far the UK tax office says overall I have made no profit yet, hence not liable for tax... Last year I could not claim my loss against Oz tax and this year I made a profit... Do I need to declare that profit even though I'm still in overall loss? Like Fensaddler I'm not on a very favourable rate, and I had to pay for some hefty repairs to get the place ready for renting, and it was empty most of the first year, hence the loss, now it is in profit, but on that business - as the tax office in UK see it - I'm still running a loss, just worried the ATO will not see it that way and hit me for tax. Cheers Neil You can't really offset repair/maintenance costs from before the property was let out. I didn't include any of the refurbishment we did to our house on our tax return as it was carried out before the property became a rental property (i.e. when the first tenants moved in). Same with any mortgage interest we paid while finding a tenant. So it's not really a 'loss' that you can now carry over. Link to comment Share on other sites More sharing options...
Peach Posted November 13, 2013 Share Posted November 13, 2013 You can't really offset repair/maintenance costs from before the property was let out. I didn't include any of the refurbishment we did to our house on our tax return as it was carried out before the property became a rental property (i.e. when the first tenants moved in). Same with any mortgage interest we paid while finding a tenant. So it's not really a 'loss' that you can now carry over. I would advise speaking to an accountant.. Link to comment Share on other sites More sharing options...
fourcorners Posted November 13, 2013 Share Posted November 13, 2013 I would advise speaking to an accountant.. Don't you worry Peach, I've done my research. That's how it works in the UK tax system when you lived in the property previously (whilst the work was being carried out). The property becomes a 'rental business' from the date your first tenants contract starts. Besides, you can only claim for maintenance and repairs, not improvements. It depends if the OP's 'hefty repairs' were just repairs or whether they were improvements. Link to comment Share on other sites More sharing options...
Recommended Posts
Archived
This topic is now archived and is closed to further replies.