MaroubraAndy Posted May 5, 2019 Share Posted May 5, 2019 Hey guys, Im just about to move out to Oz again after trying out the UK again for a year. Finally we’ve decided Oz is it for us so we’re relocating permanently. We’re all Oz and UK citizens having obtained Oz citizenship from the 10 years we lived there previously. I’ll be working for a sydney based company again and considered a resident for tax purposes. Question is in relation to how UK income derived from UK property income will be treated in Oz. Say my UK income from rental properties is just shy of the UK personal tax threshold. At the end of the tax year in Oz how will that foreign income be assessed by the ATO? I know there’s a double tax treaty between UK and Oz but I don’t know if my UK personal tax allowance will be recognised by the ATO and consequently because rental property income doesn’t exceed the UK personal tax allowance, I won’t have to declare any additional foreign income? This is will have a huge baring on whether I sell my UK property or not! Quote Link to comment Share on other sites More sharing options...
Ken Posted May 5, 2019 Share Posted May 5, 2019 (edited) 52 minutes ago, MaroubraAndy said: Hey guys, Im just about to move out to Oz again after trying out the UK again for a year. Finally we’ve decided Oz is it for us so we’re relocating permanently. We’re all Oz and UK citizens having obtained Oz citizenship from the 10 years we lived there previously. I’ll be working for a sydney based company again and considered a resident for tax purposes. Question is in relation to how UK income derived from UK property income will be treated in Oz. Say my UK income from rental properties is just shy of the UK personal tax threshold. At the end of the tax year in Oz how will that foreign income be assessed by the ATO? I know there’s a double tax treaty between UK and Oz but I don’t know if my UK personal tax allowance will be recognised by the ATO and consequently because rental property income doesn’t exceed the UK personal tax allowance, I won’t have to declare any additional foreign income? This is will have a huge baring on whether I sell my UK property or not! UK personal allowances have no relevance in Australia at all. In Australia you get a Tax Free Threshold instead ($18,200 a year which is comparable to the UK allowance - although the Australia threshold hasn't changed for several years). Your foreign income (for citizens and permanent residents anyway) is taxed in Oz in the same way as Australian income but as you'll have used up your Tax Free Threshold on your Australian income it is effectively all taxed at your highest tax rate. Under the double taxation agreement you get to offset the amount of tax you've paid in the UK against your Australian tax. However if your income in the UK is below the personal allowance threshold you will not have paid any UK tax and so will have no UK tax to offset. I should point out that it's not the gross rental income (the total rent you charge) but the net rental income (after deductions for interest, agents fees, repairs and certain depreciation if you have a depreciation report done) that is taxed. Edited May 5, 2019 by Ken Quote Link to comment Share on other sites More sharing options...
MaroubraAndy Posted May 5, 2019 Author Share Posted May 5, 2019 Great, thanks, that’s what I’d assumed but wasn’t sure. Quote Link to comment Share on other sites More sharing options...
MaroubraAndy Posted May 5, 2019 Author Share Posted May 5, 2019 I guess one positive of the situation is that ‘currently’ I’d be able to offset all UK mortgage interest against my income, which is more than I can do in the UK at the moment. Quote Link to comment Share on other sites More sharing options...
Ken Posted May 5, 2019 Share Posted May 5, 2019 3 minutes ago, MaroubraAndy said: I guess one positive of the situation is that ‘currently’ I’d be able to offset all UK mortgage interest against my income, which is more than I can do in the UK at the moment. Yes, even in the UK if it's an investment property you get to offset all the interest (and any other relevant expenses) against the rental income. But of course you can't do that if you're the one living there. Do also remember that (unless you have an interest only mortgage) it's not your whole mortgage payment that is deductible but only the interest portion. Quote Link to comment Share on other sites More sharing options...
MaroubraAndy Posted May 5, 2019 Author Share Posted May 5, 2019 Alas that’s not true any more in the UK mate. They’ve been phasing out the percentage of your interest that you can offset for the last couple of years, down to what will be a maximum of 20% of your interest in a couple of years.. essentially trying to curb residential real estate investment and amateur landlords. Quote Link to comment Share on other sites More sharing options...
Ken Posted May 5, 2019 Share Posted May 5, 2019 3 minutes ago, MaroubraAndy said: Alas that’s not true any more in the UK mate. They’ve been phasing out the percentage of your interest that you can offset for the last couple of years, down to what will be a maximum of 20% of your interest in a couple of years.. essentially trying to curb residential real estate investment and amateur landlords. Not quite as severe as you make it sound. The 20% (being the basic tax rate) of your interest is the maximum offset against your tax bill not against your rental income. If you're below the high rate threshold it makes no difference at all while for a 40% tax payer it means they only get the effect of half the interest they've paid. 1 Quote Link to comment Share on other sites More sharing options...
Alan Collett Posted May 7, 2019 Share Posted May 7, 2019 Remember also that if you can generate a loss on your rental property you can offset (negatively gear) the losses against your other taxable income. This is why optimising your tax deductions is important - I would also do a search for depreciation of rental properties. If you would like details of a Quantity Surveyor with which we work in this regard please feel able to ping a private message to me. Best regards. Quote Link to comment Share on other sites More sharing options...
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