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Robin’s Emigrating

Australian Tax Experts for UK Rental Income & Trusts

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Dear All - I'm reaching out to see if any of you have experience, or know of tax accountants that have expertise, in the treatment of UK Declarations of Trust by the ATO.

By way of background, we own a rental property in the UK that was previously held in a trust such that my wife received 99% of the beneficial interest. Effectively this meant that she declared 99% of the rental income on her UK tax return. Now that we've moved to Australia we're struggling to understand whether the ATO recognizes such trusts. We've spoken with a competent UK/Oz Tax accounting firm who've confirmed they can help, however they're currently awash with work and cannot pick up this item for a while, leaving us in a rather uncertain financial situation as we try to plan our financial affairs and secure a rental property.

Any guidance or thoughts would be warmly welcomed. Thank you 🙂

 

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Have you spoken to @Alan Collett?

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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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You say the rental property was PREVIOUSLY held in a trust, meaning it isn't any longer, so why is it a problem in that case?

I think what you really mean is that the trust still exists, but you're not sure if the ATO will recognise the legality of a trust where one beneficiary gets 99% of the income (which sounds like a tax-evasion ploy and therefore Australian law might not allow such trusts).  If they don't, then your wife would be liable for tax on 100% of the income.

I'm not sure I understand how it matters.  because I can't see how the difference between 99% and 100% is going to break the bank?


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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It's the filing deadline season for 2020 Aus tax returns where a registered tax agent is appointed, so many tax agents will be busy at this time.

Maybe make enquiry again in a couple of weeks?

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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On 11/05/2021 at 09:13, Marisawright said:

You say the rental property was PREVIOUSLY held in a trust, meaning it isn't any longer, so why is it a problem in that case?

I think what you really mean is that the trust still exists, but you're not sure if the ATO will recognise the legality of a trust where one beneficiary gets 99% of the income (which sounds like a tax-evasion ploy and therefore Australian law might not allow such trusts).  If they don't, then your wife would be liable for tax on 100% of the income.

I'm not sure I understand how it matters.  because I can't see how the difference between 99% and 100% is going to break the bank?

I suspect they are actually referring to the difference between 50% and 99% for one co-owner and 50% and 1% for the other. All rental income and expenses between co-owners must be split between the co-owners according to their legal interest in the property regardless of any agreement between the owners to do otherwise. Has the UK declaration of trust actually changed the legal ownership or is it just an agreement on how to split the income? The answer to that question determines the tax treatment.

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Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

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