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North to South

Tax on UK Property

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Hi,

 

I'm wondering if anyone out there on PIO has any knowledge on the tax rules on rental income on your main residence in the UK whilst living in Australia.  Due to the Covid impact we are struggling to sell out main residence in the UK and are thinking of renting it for 12-18 months until things hopefully settle down and then sell the house and transfer the money at that time to ourselves in Australia.  Whilst I know from the UK tax situation in the UK, I just wondered if we would be liable to pay any tax when the money is transferred to Australia after the sale.

Any guidance would be most welcome.

Thanks.

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2 hours ago, North to South said:

I'm wondering if anyone out there on PIO has any knowledge on the tax rules on rental income on your main residence in the UK whilst living in Australia.  Due to the Covid impact we are struggling to sell out main residence in the UK and are thinking of renting it for 12-18 months until things hopefully settle down and then sell the house and transfer the money at that time to ourselves in Australia.  Whilst I know from the UK tax situation in the UK, I just wondered if we would be liable to pay any tax when the money is transferred to Australia after the sale.

You'll have to declare the rental income on your Australian tax return while you own the property (even if you don't transfer the money into the country).   You can claim the interest on your mortgage (not the whole mortgage payment) as an expense - you'll need to ask your bank each year how much the interest part of your mortgage is.

However, as it was your principal place of residence, you won't pay any tax on the sale proceeds when you transfer them, provided you sell within 5 years.


Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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Hi N to S.

What is your visa status in Australia?

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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10 hours ago, Marisawright said:

You'll have to declare the rental income on your Australian tax return while you own the property (even if you don't transfer the money into the country).   You can claim the interest on your mortgage (not the whole mortgage payment) as an expense - you'll need to ask your bank each year how much the interest part of your mortgage is.

However, as it was your principal place of residence, you won't pay any tax on the sale proceeds when you transfer them, provided you sell within 5 years.

Don't forget the UK capital gains tax position.

And the capital gains tax free period in Australia is 6 years, not 5.

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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17 minutes ago, Alan Collett said:

And the capital gains tax free period in Australia is 6 years, not 5.

But that is from the date they stop living in the property, not allowing for the year or so they're planning to let it out before they sell. 

And they did say they are aware of the UK tax position - though it is important to check whether being non-resident changes what they think they know.

Edited by Marisawright

Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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Yes, the UK capital gains tax position for non residents selling a residential property in the UK is usually different to that for UK resident individuals.

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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And ... there can also be a forex gain or loss to consider for Aus tax purposes on the redemption of the mortgage.

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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Hi, thanks for these replies.

We have Perm Residency Visas.  I'm just clarifying the CGT in the UK if I'm no longer a resident, but I believe we will still be exempt because it's been our main residence for 5 years and if we sell within the first 12 months there is no CGT, but have to declare the sale within 30 days or face a penalty.

My preference is still to sell, but personally I'd rather just do the quickest thing to get to Australia because our daughter is due to start school in Jan and don't want to risk her missing too much of the start of Y10.

Thanks :)

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