tracybayliss Posted January 19, 2014 Share Posted January 19, 2014 Hi guys we need to be in oz before may 13 as our visa runs out we know its impossible to sell our house we have no mortgage and was going to rent probably anyway so does this have any implications. Someone mentioned something bout tax can anyone shed any light on this we don't plan to do it long term maybe two years as a bit of a income until we settle,. Thanks Link to comment Share on other sites More sharing options...
wirralrosie Posted January 19, 2014 Share Posted January 19, 2014 We are on a 457 visa and pay tax on the rental income in the UK. Link to comment Share on other sites More sharing options...
Gary and Jenny Posted January 19, 2014 Share Posted January 19, 2014 I would say make sure everything is in good working order and try and get a trusted tenant Gaz Link to comment Share on other sites More sharing options...
Marisawright Posted January 19, 2014 Share Posted January 19, 2014 Hi guys we need to be in oz before may 13 as our visa runs out we know its impossible to sell our house we have no mortgage and was going to rent probably anyway so does this have any implications. Someone mentioned something bout tax can anyone shed any light on this we don't plan to do it long term maybe two years as a bit of a income until we settle,. Thanks Yes you will have to pay tax but think about it this way - you're being taxed because you're making a profit. Making money and losing a bit of it to tax, is better than not making money. Get a good agent and go for it! Link to comment Share on other sites More sharing options...
garyupnorth Posted January 19, 2014 Share Posted January 19, 2014 You will have to declare the profit on your rental, a good letting a good letting agent to tax agent will point you in the right direction to stay on the right side of HMRC. Link to comment Share on other sites More sharing options...
tracybayliss Posted January 19, 2014 Author Share Posted January 19, 2014 We are on a 457 visa and pay tax on the rental income in the UK. Hi yes I understand having to pay tax on the profit side sorry meant what bout if we sell after a couple of years would we be taxed on the money we maded from the australian side of things Link to comment Share on other sites More sharing options...
garyupnorth Posted January 19, 2014 Share Posted January 19, 2014 Possibly capital gains if there is an increase in value of the house.....I'm sure a tax sort of person will be along shortly. Link to comment Share on other sites More sharing options...
Marisawright Posted January 19, 2014 Share Posted January 19, 2014 Profit is subject to tax in the country where it is made. So you'd be taxed by the UK not Australia, is my understanding. Link to comment Share on other sites More sharing options...
Gbye grey sky Posted January 19, 2014 Share Posted January 19, 2014 We are on a 457 visa and pay tax on the rental income in the UK. If you are on a 457 you can seek to receive your rent without tax deducted as a non-resident you would not be liable to UK tax. You would only pay Oz tax on your Oz earnings. This is one of the key benefits of a 457. Different if you are in Oz as a PR. Link to comment Share on other sites More sharing options...
tracybayliss Posted January 19, 2014 Author Share Posted January 19, 2014 We have a PR visa sorry for sounding really thick but don't understand this side of it we had sort of come to thinking we were not emigrating until this week as my daughter has never wanted to come and we were following her dream of completing stage school in London until last week when due to personal circ she's withdrawn from her course and now wanting to go to oz so we are panicking bout sorting stuff. Would appreciate if anyone can add for more advice in this area Link to comment Share on other sites More sharing options...
Flathead Posted January 19, 2014 Share Posted January 19, 2014 Profit is subject to tax in the country where it is made. So you'd be taxed by the UK not Australia, is my understanding. If you are an Australian resident on a PR visa then you are liable for Australian tax on your worldwide income including capital gains. as far as I know CGT would apply if the value of the house increased in Dollars.....this can be affected both by house prices going up and by changes in the exchange rate Link to comment Share on other sites More sharing options...
Mark 1234 Posted January 19, 2014 Share Posted January 19, 2014 If you rent the property, then sell it, you'll be liable for capital gains tax in the UK alone. However, if you sell your main home - even though the asset is liable to Capital Gains Tax - you may qualify for Private Residence Relief. This may mean there's no tax to pay. http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm Link to comment Share on other sites More sharing options...
kmmr Posted January 19, 2014 Share Posted January 19, 2014 I can only tell you the UK rules sorry. But this will get you started: Capital Gains tax is payable on the gain in theory, but there are significant exemptions. If you sell within 3 years of it being your primary residence then you are eligible for Primary Residence Relief. If you sell after that, then you only pay CGT for the time when you were not living there. Plus you get further relief. An example may help: 1. Work out the total gain For example, you live in the property from 2008-2014. Then you rent it out until 2019, and sell it in 2020. Lets assume your capital gain (after some allowed expenses, like selling costs) is £200,000. 2. Work out the primary residence relief exemption You have owned it for 12 years. You lived there for 6 years + add on 3 years free and you have 9 years exempt. You therefore only have to pay CGT for 3 of the 12 years. So take the £200k and multiply by (3/12)= £50k 3. Reduce by Letting Relief If you let out all or part of a property that was your principle primary residence, then you can get up to another £40k relief for the time when you were renting it. I don't fully understand this exemption to be honest, but lets assume you get another £20k allowance. This step could actually remove all your gain, but for the purposes of this example lets assume it simply reduces your gain to £30k 4. Reduce by your Annual CGT allowance If you were in the UK the first £10,900 (2013) is exempt from CGT. And if you own it in two names then you can use both peoples allowances. Assuming there are two of you. £30,000 - 10,900 - 10,900 = £8200 5. Pay tax on what is left You then add the gain (£4100 each) to your incomes and you pay for it at your marginal rate. So if you are both high rate taxpayers it is 28%. So total tax paid on a £200k gain is £2296. Less if one or both are lower rate tax payers. Link to comment Share on other sites More sharing options...
Marisawright Posted January 19, 2014 Share Posted January 19, 2014 If you are an Australian resident on a PR visa then you are liable for Australian tax on your worldwide income including capital gains.as far as I know CGT would apply if the value of the house increased in Dollars.....this can be affected both by house prices going up and by changes in the exchange rate This is contrary to everything we've been told. We've been told that if we move to the UK, we will pay UK tax on income we earn in the UK, and Australian tax on income we earn in Oz (at non-resident rates). As the tax agreement is reciprocal, the reverse should apply. I'd be interested to get some info if you've got it, because it would be cheaper for me to pay tax on the lot in the UK. Link to comment Share on other sites More sharing options...
Alan Collett Posted January 19, 2014 Share Posted January 19, 2014 If you rent the property, then sell it, you'll be liable for capital gains tax in the UK alone. However, if you sell your main home - even though the asset is liable to Capital Gains Tax - you may qualify for Private Residence Relief. This may mean there's no tax to pay. http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm => Not correct. You are only subject to UK CGT if you are a resident of the UK. Notwithstanding changes muted by the UK Chancellor, effectove 6th April 2015. => If you are a tax resident of Australia and have a permanent residency visa, or are an Australian citizen you will pay CGT in Australia - unless you can make use of one of the exemptions from CGT. The most common CGT exemption in Australia that applies in this scenario is one that applies where income is being derived from a former main residence: http://www.ato.gov.au/General/Capital-gains-tax/In-detail/Real-estate/Treating-a-dwelling-as-your-main-residence-after-you-move-out/ In case of need: http://www.gmtax.com.au/downloads/ Best regards. Link to comment Share on other sites More sharing options...
Flathead Posted January 19, 2014 Share Posted January 19, 2014 This is contrary to everything we've been told. We've been told that if we move to the UK, we will pay UK tax on income we earn in the UK, and Australian tax on income we earn in Oz (at non-resident rates). As the tax agreement is reciprocal, the reverse should apply. I'd be interested to get some info if you've got it, because it would be cheaper for me to pay tax on the lot in the UK. There is a 'double taxation' agreement between the two countries which means you only need to pay tax in the country of residence. Most of my income is in sterling but I only pay tax in Australia. If you are an Australian resident you are taxed on your worldwide income......unless you are on some temporary visas Link to comment Share on other sites More sharing options...
Flathead Posted January 19, 2014 Share Posted January 19, 2014 => Not correct. You are only subject to UK CGT if you are a resident of the UK. Notwithstanding changes muted by the UK Chancellor, effectove 6th April 2015. => If you are a tax resident of Australia and have a permanent residency visa, or are an Australian citizen you will pay CGT in Australia - unless you can make use of one of the exemptions from CGT. The most common CGT exemption in Australia that applies in this scenario is one that applies where income is being derived from a former main residence: http://www.ato.gov.au/General/Capital-gains-tax/In-detail/Real-estate/Treating-a-dwelling-as-your-main-residence-after-you-move-out/ In case of need: http://www.gmtax.com.au/downloads/ Best regards. Indeed Link to comment Share on other sites More sharing options...
Alan Collett Posted January 19, 2014 Share Posted January 19, 2014 This is contrary to everything we've been told. We've been told that if we move to the UK, we will pay UK tax on income we earn in the UK, and Australian tax on income we earn in Oz (at non-resident rates). As the tax agreement is reciprocal, the reverse should apply. I'd be interested to get some info if you've got it, because it would be cheaper for me to pay tax on the lot in the UK. The Tax Treaty between the UK and Australia doesn't work this way. The UK doesn't have non resident rates of income tax, for example - Australia does. Similarly, Australia taxes non-residents who realise a capital gain on the sale of real estate located in Australia. The UK doesn't (presently) do this in respect of UK property owned by non-UK resident individuals. Best regards. Link to comment Share on other sites More sharing options...
ItchyFeet76 Posted January 19, 2014 Share Posted January 19, 2014 If you rent your UK house out you need to become a non-resident landlord for tax purposes (there's a form from HMRC), so you receive the gross rental income and then do a tax return once a year and declare any profit you make (taking into account your personal allowance, as mentioned above in KMMR's post). It's lucky you don't have a mortgage otherwise you would most probably have had to pay an additional interest rate as a "Consent to Let" fee. Ours would be 1.5$ per month on each mortgage (we have 3 mortgages on this house). You would need to ensure your boiler is serviced annually and I think you may also need CO2 / smoke alarms (mains-wired). Fire blankets / extinguishers are not, as far as I am aware, a legal requirement, but they would be a wise thing to have (and don't cost the earth) to protect your property. We were told if we allowed access to the attic and it wasn't boarded then we may be liable if anyone put their foot through the ceiling, as leaving it accessible was tantamount to encouraging people to use it (!), so we would have padlocked it for this reason. It would be wise to put money aside every month for contingencies, such as repairs, inventory fees for new tenants (allow for 1.5 tenants a year...?), and I would have said unoccupancy costs to cover the mortgage, but this isn't applicable in your case (lucky thing!) Rental agent management fees (include VAT @ 20%) and other associated costs can be used to offset your profit for tax purposes, as can home-improvements and repairs. Good luck with whatever you decide! Link to comment Share on other sites More sharing options...
Alan Collett Posted January 19, 2014 Share Posted January 19, 2014 There is a 'double taxation' agreement between the two countries which means you only need to pay tax in the country of residence. Most of my income is in sterling but I only pay tax in Australia. If you are an Australian resident you are taxed on your worldwide income......unless you are on some temporary visas That's not wholly correct either - sorry. If you receive (say) property rental income in the UK it is still taxable in the UK - as well as in Australia if you are a tax resident there (temporary visaholders aside). Similarly if you are self employed and receive income from a permanent establishment in the UK it is taxable in the UK, even if you are a tax resident of Australia. Exercise care ... Best regards. Link to comment Share on other sites More sharing options...
Alan Collett Posted January 19, 2014 Share Posted January 19, 2014 I can only tell you the UK rules sorry. But this will get you started: Capital Gains tax is payable on the gain in theory, but there are significant exemptions. If you sell within 3 years of it being your primary residence then you are eligible for Primary Residence Relief. If you sell after that, then you only pay CGT for the time when you were not living there. Plus you get further relief. An example may help: 1. Work out the total gain For example, you live in the property from 2008-2014. Then you rent it out until 2019, and sell it in 2020. Lets assume your capital gain (after some allowed expenses, like selling costs) is £200,000. 2. Work out the primary residence relief exemption You have owned it for 12 years. You lived there for 6 years + add on 3 years free and you have 9 years exempt. You therefore only have to pay CGT for 3 of the 12 years. So take the £200k and multiply by (3/12)= £50k 3. Reduce by Letting Relief If you let out all or part of a property that was your principle primary residence, then you can get up to another £40k relief for the time when you were renting it. I don't fully understand this exemption to be honest, but lets assume you get another £20k allowance. This step could actually remove all your gain, but for the purposes of this example lets assume it simply reduces your gain to £30k 4. Reduce by your Annual CGT allowance If you were in the UK the first £10,900 (2013) is exempt from CGT. And if you own it in two names then you can use both peoples allowances. Assuming there are two of you. £30,000 - 10,900 - 10,900 = £8200 5. Pay tax on what is left You then add the gain (£4100 each) to your incomes and you pay for it at your marginal rate. So if you are both high rate taxpayers it is 28%. So total tax paid on a £200k gain is £2296. Less if one or both are lower rate tax payers. If you are not a resident of the UK the UK's CGT provisions don't apply to you ... subject to whatever might eventuate over the next 15 months in the light of the UK Chancellor's comments in the Autumn Statement. Best regards. Link to comment Share on other sites More sharing options...
Flathead Posted January 19, 2014 Share Posted January 19, 2014 That's not wholly correct either - sorry. If you receive (say) property rental income in the UK it is still taxable in the UK - as well as in Australia if you are a tax resident there (temporary visaholders aside). Similarly if you are self employed and receive income from a permanent establishment in the UK it is taxable in the UK, even if you are a tax resident of Australia. Exercise care ... Best regards. Sorry....I was referring to CGT on the sale of the house...not the rental income. Link to comment Share on other sites More sharing options...
Alan Collett Posted January 19, 2014 Share Posted January 19, 2014 If you are on a 457 you can seek to receive your rent without tax deducted as a non-resident you would not be liable to UK tax. You would only pay Oz tax on your Oz earnings. This is one of the key benefits of a 457. Different if you are in Oz as a PR. It's not just 457 visaholders who can use this tax exemption. It is available to all temporary or provisional visaholders, including provisional business skills visaholders under subclasses 160 to 165 and 188, and the temporary New Zealand citizen visaholders (subclass 461) - though holders of provisional partner and spouse visas usually can't access this tax exemption. Best regards. Link to comment Share on other sites More sharing options...
kmmr Posted January 19, 2014 Share Posted January 19, 2014 If you are not a resident of the UK the UK's CGT provisions don't apply to you ... subject to whatever might eventuate over the next 15 months in the light of the UK Chancellor's comments in the Autumn Statement. Best regards. So, having a look at the Australian CGT rules, it looks like you get 6 years on top of the time you actually lived there, but no lettings relief. Plus there are differences in how the actual capital gain is made. I'm actually in the same situation, so thanks for the guidance. Link to comment Share on other sites More sharing options...
tracybayliss Posted January 20, 2014 Author Share Posted January 20, 2014 That's not wholly correct either - sorry. If you receive (say) property rental income in the UK it is still taxable in the UK - as well as in Australia if you are a tax resident there (temporary visaholders aside). Similarly if you are self employed and receive income from a permanent establishment in the UK it is taxable in the UK, even if you are a tax resident of Australia. Exercise care ... Best regards. god I've never been so confused in my life.. So please in really simple terms are you saying if we rent our house we would pay tax to the tax office in the uk and the tax to oz office as well how unfair is that. Also I'm so confused as to what happens if we sell I've looked at the links at totally feel sick at the thought of all this. Please in quite simple terms can someone please explain what happens if we rent for say two years then sell and transfer money over, we've owned this house for twenty years I've read such conflicting advices on this website now. Help Link to comment Share on other sites More sharing options...
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