fourcorners Posted November 13, 2013 Share Posted November 13, 2013 Reading the ATO publication on rental properties: http://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Investments,-including-rental-properties/Rental-properties-2012-13/ Under the Repairs and Maintenance section on page 12, it says: However, the following expenses are capital, or of a capital nature, and are not deductible: - replacement of an entire structure or unit of property (such as a complete fence or building, a stove, kitchen cupboards or refrigerator) - improvements, renovations, extensions and alterations, and - initial repairs, for example, in remedying defects, damage or deterioration that existed at the date you acquired the property. Example: The Hitchmans needed to do some repairs to their newly acquired rental property before the first tenants moved in. They paid an interior decorator to repaint dirty walls, replace broken light fittings and repair doors on two bedrooms. They also discovered white ants in some of the floorboards. This required white ant treatment and replacement of some of the boards. These expenses were incurred to make the property suitable for rental and did not arise from the Hitchmans’ use of the property to generate assessable rental income. The expenses are capital in nature and the Hitchmans are not able to claim a deduction for these expenses. Link to comment Share on other sites More sharing options...
fensaddler Posted November 13, 2013 Share Posted November 13, 2013 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. I'm still making a modest profit, just not anything like as much as if First Direct had kept me on. Probably if I'd not have said anything about renting I'd still be borrowing from them... Did FD consent to your renting your house out? But neither values nor rentals are anything special in the urban West Midlands, and typical 25-30% losses in house value through the GFC have not been recovered at all, unlike parts of the South East. Link to comment Share on other sites More sharing options...
fourcorners Posted November 13, 2013 Share Posted November 13, 2013 I'm still making a modest profit, just not anything like as much as if First Direct had kept me on. Probably if I'd not have said anything about renting I'd still be borrowing from them... Did FD consent to your renting your house out? But neither values nor rentals are anything special in the urban West Midlands, and typical 25-30% losses in house value through the GFC have not been recovered at all, unlike parts of the South East. Makes me very happy about Cheltenham and Glos mortgages. I rang them up, paid a 250 pound fee to get consent to let, and our application was accepted. No change to our interest rate which is now a very pleasing 2.5%. There are only a couple of clauses such as not renting for more than 12 months on a single contract. And being 457 visa holders we have paid no tax on our UK rental income, for us it works out better if we hold off becoming permanent resident as the few benefits of the Australian tax system vs the UK mean we would probably be worse off. I was reading that you can claim costs of visiting your rental property overseas, but say if you go on holiday for 2 weeks and visit the house for one of those days, you can only claim a proportional cost of the airfares, i.e. 1/14th. Similarly you can claim the cost of one nights accommodation if you have to stay somewhere near your property. So unless you have multiple properties it's hardly worth the effort. Fensaddler you can't claim depreciation on capital improvements on a UK property in the UK tax system. I think the Australian tax system is set up far more to encourage buy-to-let investments and therefore property development in general. Link to comment Share on other sites More sharing options...
Alan Collett Posted November 13, 2013 Share Posted November 13, 2013 http://www.hmrc.gov.uk/manuals/pimmanual/pim3005.htm Capital allowances in the UK ... Best regards. Link to comment Share on other sites More sharing options...
fensaddler Posted November 13, 2013 Share Posted November 13, 2013 Fensaddler you can't claim depreciation on capital improvements on a UK property in the UK tax system. I think the Australian tax system is set up far more to encourage buy-to-let investments and therefore property development in general. I don't think I made any comment about this? Someone else?? I have an excellent accountant in the UK, and I leave them to advise what I can and cannot claim... Pasties though, I like. Link to comment Share on other sites More sharing options...
fourcorners Posted November 13, 2013 Share Posted November 13, 2013 I don't think I made any comment about this? Someone else?? I have an excellent accountant in the UK, and I leave them to advise what I can and cannot claim... Pasties though, I like. Sorry fensaddler, wasn't you. I just rechecked I got an email saying NickyNook replied in the thread and asked the question about capital improvements but it seems to have disappeared from the thread now. I don't think the UK tax situation is that complicated from the point of view of an expat with one or two rental properties. I have found it easy to navigate without the help of an accountant. Just trying to help others who don't want to pay an accountant to do what is within the grasp of most people. Link to comment Share on other sites More sharing options...
Alan Collett Posted November 13, 2013 Share Posted November 13, 2013 What do those of you who don't have a tax accountant involved do about the Residence supplement to the main UK Tax Return? My understanding is that when lodging a tax return electronically (rather than in hard copy paper form) this supplement can't be completed from what is available via the HMRC website, and that 3rd party tax software has to be bought to enable the supplement to be lodged - or a tax accountant with UK tax software has to be engaged. Best regards. Link to comment Share on other sites More sharing options...
Alaska Posted November 13, 2013 Share Posted November 13, 2013 What do those of you who don't have a tax accountant involved do about the Residence supplement to the main UK Tax Return? My understanding is that when lodging a tax return electronically (rather than in hard copy paper form) this supplement can't be completed from what is available via the HMRC website, and that 3rd party tax software has to be bought to enable the supplement to be lodged - or a tax accountant with UK tax software has to be engaged. Best regards. We use TaxCalc which costs around £25 for up to 6 tax returns. Link to comment Share on other sites More sharing options...
jonbclark Posted November 14, 2013 Share Posted November 14, 2013 Neil, It's not just the rental profit that is taxable the repayment portion of your mortgage is too. So for example, if you rent your house for £1000/month.. This is my take on it, you should seek advice of an accountant. monthly income from tenant: 1000 Monthly mortgage payment: 900 minus the interest portion: -300 600 Profit: 100 Taxable earnings 600+100: £700/month This is a really basic example as in reality you'll first deduct estate agents fees and other expenses ( gas checks, insurance etc.) You then work it out the tax year and convert to dollars using the average exchange rate for the period. If you share the mortgage with a partner then your taxable portion is halved. The uk's low interest rates do not help.. Hope this helps Jon ps; anyone else feel free to chip in as I've just got PR and it will be my first time next Aussie tax return.. Link to comment Share on other sites More sharing options...
Alan Collett Posted November 14, 2013 Share Posted November 14, 2013 I'd be more inclined to say: * Profit is £700 * Net cash flow is +£100 per month. Speaking as an accountant ... :-) Best regards. Link to comment Share on other sites More sharing options...
jonbclark Posted November 16, 2013 Share Posted November 16, 2013 Alan, Was I on the right track? regards jon Link to comment Share on other sites More sharing options...
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