Tax on Uk rental income

[MATT818]

Hi

Looking for help!

I have just done my tax return in Oz, and was wondering if anyone knew how i could possibly lower the amount of tax i pay next year on my rental income i get from my property back in the UK? I think i read, or heard you can claim depreciation on your property as your renting it out?!

Might be wrong and just pay the extra tax on the income!

Any help would be appreciated.

Thanks 

Matt

[Marisawright]

I'm assuming you've claimed the obvious expenses, like the interest portion of your mortgage, and fees if you're paying an agent to look after it?

You are right about the depreciation, but it depends how old the property is.  You can only claim depreciation on the basic building for 40 years, so if your house is older than that, you're out of luck.  However you can also claim depreciation on the interior fixtures and fittings, and any improvements you've made (e.g. conservatory, extension), so even on an old house, you can sometimes shave a few dollars off your tax. It depends how much renovation you've done.

[MATT818]

Hi

Yes, have claimed the usual like my agents fee, maintenance and what i can claim. I just wondered how you go about claiming for depreciation on fixtures and fittings!

 

[Marisawright]

You need to get someone to do a depreciation report.   He comes in and evaluates the property, and then whatever value he puts on the fixtures and fittings, you can claim depreciation on from that day forward.  You can't backdate it.  That's why ideally, you'd get the deprecation report before you start renting out the property.

Note that the value is not replacement value, it's the actual value.  So if your bathroom, kitchen etc are old, it's not going to be worth doing. 

It's easy to get a depreciation report in Australia, but since there's no benefit under UK taxation, finding qualified people to do one in the UK is hard. I believe @Alan Collett knows a good one.

[Alan Collett]

On 29/07/2018 at 12:22, Marisawright said:

You need to get someone to do a depreciation report.   He comes in and evaluates the property, and then whatever value he puts on the fixtures and fittings, you can claim depreciation on from that day forward.  You can't backdate it.  That's why ideally, you'd get the deprecation report before you start renting out the property.

Note that the value is not replacement value, it's the actual value.  So if your bathroom, kitchen etc are old, it's not going to be worth doing. 

It's easy to get a depreciation report in Australia, but since there's no benefit under UK taxation, finding qualified people to do one in the UK is hard. I believe @Alan Collett knows a good one.

You can lodge an amendment request for already lodged tax returns in Australia.

Usually at least the last 2 years, plus maybe another 2 years prior to that on appeal.

I have seen clients with repayments of '000's of $'s due to depreciation not previously claimed.

Best regards.

[Marisawright]

6 hours ago, Alan Collett said:

I have seen clients with repayments of '000's of $'s due to depreciation not previously claimed.

Interesting.  I knew you could lodge an amendment if you forgot to claim depreciation, but does that mean you can get someone to do a valuation report today, and retrospectively work out what depreciation would have been for previous years?

[Alan Collett]

12 hours ago, Marisawright said:

Interesting.  I knew you could lodge an amendment if you forgot to claim depreciation, but does that mean you can get someone to do a valuation report today, and retrospectively work out what depreciation would have been for previous years?

Yes, it does - so long as the history of what was acquired at the property is reliable.

Best regards,

[Carrie]

Why is the OP paying tax to the ATO on a UK rental property?  I thought he wouldn't need to thanks to the double tax treaty between UK/Australia. Linking this to my own situation.

Thanks for your advice.

[MATT818]

Hi

And is it worth and paying the extra and find an accountant to do my tax, rather then say go to someone like H & R Block?! 

Cheers

[Marisawright]

4 hours ago, Carrie said:

Why is the OP paying tax to the ATO on a UK rental property?  I thought he wouldn't need to thanks to the double tax treaty between UK/Australia. Linking this to my own situation.

Thanks for your advice.

You must declare all income to the Australian tax man wherever it is earned. You also declare any British tax already paid on that income, and that’s taken into account. 

[Marisawright]

2 hours ago, MATT818 said:

Hi

And is it worth and paying the extra and find an accountant to do my tax, rather then say go to someone like H & R Block?! 

Cheers

H&R Block is fine for simple stuff but if you have a property, better off with a proper tax agent, not somebody who did an evening course

[Alan Collett]

2 hours ago, MATT818 said:

Hi

And is it worth and paying the extra and find an accountant to do my tax, rather then say go to someone like H & R Block?! 

Cheers

Maybe best to find a tax accountant who is knowledgeable about tax in Australia and the UK, and who can lodge tax returns in both countries.

No names mentioned ...

Best regards.

[Alan Collett]

4 hours ago, Carrie said:

Why is the OP paying tax to the ATO on a UK rental property?  I thought he wouldn't need to thanks to the double tax treaty between UK/Australia. Linking this to my own situation.

Thanks for your advice.

Hi Carrie.

Are you a temporary visa holder?

If not you should be including your UK net rental income on your Australian tax returns - assuming you are a tax resident of Australia.

Best regards.

[Carrie]

Hi Alan - yes, I have dual citizenship - UK and NZ (and no ties to an Australian partner) so I would initially be be a temporary visa holder. Thanks for the link to the blog on the FB group.

[Marisawright]

8 hours ago, Carrie said:

Hi Alan - yes, I have dual citizenship - UK and NZ (and no ties to an Australian partner) so I would initially be be a temporary visa holder. Thanks for the link to the blog on the FB group.

Bear in mind that being a citizen is not the same thing as being a resident.  Most tax rules, both in Australia and in the UK, are based on whether you're a resident in that tax year, not whether you are a citizen.   If you are not resident, then you are taxed like a foreigner for most things, though there are a few perks for citizens in the UK.  

I assume you'll be coming to Australia under the rules which allow New Zealanders to live and work in Australia, so you're lucky, you will be classed as a temporary resident:

https://www.beyondaccountancy.com.au/something-every-kiwi-in-australia-needs-to-know/

[Carrie]

Thanks for the link. 

Yes, you assume correct. I am not a tax resident of NZ since I haven't lived there for many years but in this case I don't think that matters since the temporary visa holder requires NZ Citizenship, not NZ tax residency.

[Alan Collett]

To access the temporary resident tax exemption as a NZ citizen you cannot be an "eligible New Zealand citizen":

Broadly, an eligible NZ citizen is a person who is defined as a protected Special Category Visa holder under the Social Security Act 1991.

Protected SCV holders are those who arrived in Australia on a New Zealand passport and were:

• in Australia on 26 February 2001, or
• in Australia for 12 months in the 2 years immediately before this date, or
• assessed as protected SCV holders under the Social Security Act 1991

Best regards.

[Carrie]

Thanks Alan - looks good.

[Carrie]

Another question on this if I may.  If I want to qualify as a temporary resident for tax purposes to benefit from the tax break on UK rental income , do I still need to get a Tax File Number?

Can temporary residents for tax purposes still qualify for a medicare card?

Thanks

[Alan Collett]

Hi Carrie.

Not sure I follow what you mean by "wanting to qualify" as a temporary tax resident.

You either qualify or you don't.

If you are a temporary visa holder who is living in Australia you may be able to meet the requirements:

https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Foreign-income-of-Australian-residents/Foreign-income-exemption-for-temporary-residents---introduction/

Remember the requirement to disclose foreign income on your Australian tax return as target foreign income, if you are a temporary visa holder.

The entitlement to a Medicare card will probably depend on your visa type and whether you can access a RHCA.

Best regards.

Best regards.