Anyone really understand the double taxation agreement?

[Marisawright]

Not sure if it's appropriate to ask in this forum, as I'm going in the opposite direction - moving back to the UK.

 

I have a rental property in Australia which I don't want to sell (too much CGT liability). We also have bank accounts which we're not in a hurry to close - we feel more secure with Aussie banks, given the existence of the guarantee. We'll use the Citibank Plus debit card to transfer money as we need it (no fees).

 

The question is, where do we pay tax? I understood we'd be taxed by Australia on both rental income and bank interest as a non-resident, not by the UK, because "tax is levied in the country where it is earned".

 

We then have to declare the income on our UK tax return but also declare the tax we've paid on it, so they won't tax it again.

 

Just to be awkward, if you're entitled to a pension/super from Australia, it gets taxed in the country of residence.

 

But on another thread, I'm being told that all tax is payable only in the country where you are resident.

 

Totally confused.

Edited January 19, 2014 by Marisawright

[Guest The Pom Queen]

I would recommend chatting with Alan Collett he is an expert on things like this

[Sydney Boy]

There is an agreement between UK and Australia so you don't pay tax twice. So if you do pay tax on income in one country ( called X ) where you don't live , you can get a "credit" on your tax return on the other country (called Y) you are living in.

 

But for some income in country X you may be able to come to an agreement with the local tax people to pay the income WITHOUT having any tax deducted at source.

 

In my case my Rental agents in UK do NOT have to deduct any tax at source and I receive it gross even though I'm currently a non resident and living in Australia. I still fill in a UK tax return and declare it annually and have to pay UK tax on any profits over the 10,000 pounds personal UK income tax free limit. But any tax paid is then a credit on my Australian Tax return.

 

I'm not an expert on the double taxation rules but that's how it works for me practically.

 

Its a similar story for foreign pension income under double taxation rules but again I'm not an expert. From here http://www.hmrc.gov.uk/pensioners/paying-abroad.htm the UK Tax office states the following

 

Once you've retired abroad, even if you're classed as being 'non-resident' for tax in the UK, you'll still pay tax on most pensions you receive from the UK. However if you're living in a country that the UK has a ‘double taxation agreement’ with, you may be able to get these pensions without Income Tax being deducted. You may also be able to claim a refund of any tax which has already been deducted. You can find more information about making a claim in the third link below.

 

Maybe an expert can tell us does it mean the pension income is REALLY tax free in the country you don't live in ( e.g UK ) or do you still need to fill in a UK tax return and pay UK tax at the end of the financial year if applicable ?? In my case I do fill in a UK tax return even though from above do i really need to declare anything if a non resident....very confusing.

 

Not sure if it's appropriate to ask in this forum, as I'm going in the opposite direction - moving back to the UK.

 

I have a rental property in Australia which I don't want to sell (too much CGT liability). We also have bank accounts which we're not in a hurry to close - we feel more secure with Aussie banks, given the existence of the guarantee. We'll use the Citibank Plus debit card to transfer money as we need it (no fees).

 

The question is, where do we pay tax? I understood we'd be taxed by Australia on both rental income and bank interest as a non-resident, not by the UK, because "tax is levied in the country where it is earned".

 

We then have to declare the income on our UK tax return but also declare the tax we've paid on it, so they won't tax it again.

 

Just to be awkward, if you're entitled to a pension/super from Australia, it gets taxed in the country of residence.

 

But on another thread, I'm being told that all tax is payable only in the country where you are resident.

 

Totally confused.

[Gbye grey sky]

Not sure if it's appropriate to ask in this forum, as I'm going in the opposite direction - moving back to the UK.

 

I have a rental property in Australia which I don't want to sell (too much CGT liability). We also have bank accounts which we're not in a hurry to close - we feel more secure with Aussie banks, given the existence of the guarantee. We'll use the Citibank Plus debit card to transfer money as we need it (no fees).

 

The question is, where do we pay tax? I understood we'd be taxed by Australia on both rental income and bank interest as a non-resident, not by the UK, because "tax is levied in the country where it is earned".

 

We then have to declare the income on our UK tax return but also declare the tax we've paid on it, so they won't tax it again.

 

Just to be awkward, if you're entitled to a pension/super from Australia, it gets taxed in the country of residence.

 

But on another thread, I'm being told that all tax is payable only in the country where you are resident.

 

Totally confused.

 

Seriously this is one of those situations where it is probably worth paying for advice. You have clearly given this some thought but would you potentially never sell the property? If you sold it in the future and you were non-resident might the CGT be worse.

 

Also there may be no fees for transferring funds but might you get stung with the exchange rates they give you. You are also at the mercy of exchange rate fluctuations and will have to manage an investment property on the other side of the world.

 

Personally I hate paying for advice and have always done my own tax in the UK but intend to break the habit of a lifetime when moving to Australia as I do not understand the two systems or how they interact with one another.

[flag of convenience]

You will pay the tax rate of 25% as a non resident. Payable from first dollar from memory. Big reason why didn't invest further in cheaper days.

[Rupert]

Not sure if it's appropriate to ask in this forum, as I'm going in the opposite direction - moving back to the UK.

 

I have a rental property in Australia which I don't want to sell (too much CGT liability). We also have bank accounts which we're not in a hurry to close - we feel more secure with Aussie banks, given the existence of the guarantee. We'll use the Citibank Plus debit card to transfer money as we need it (no fees).

 

The question is, where do we pay tax? I understood we'd be taxed by Australia on both rental income and bank interest as a non-resident, not by the UK, because "tax is levied in the country where it is earned".

 

We then have to declare the income on our UK tax return but also declare the tax we've paid on it, so they won't tax it again.

 

Just to be awkward, if you're entitled to a pension/super from Australia, it gets taxed in the country of residence.

 

But on another thread, I'm being told that all tax is payable only in the country where you are resident.

 

Totally confused.

 

If you google you can find a copy of the double taxation agreement between Australia and UK. You will see that each type of income is dealt with differently. That is why you have heard different things about rental income versus pension income. The treaty is not just a case of living in one country and therefore paying tax there. What you said about rental income is correct.