Owning a property & living in the UK

[aconcannon]

Does anyone have an advice or knowledge to share in regards to owning a property in Australia, renting it out & living in the UK? Curious as to what costs are involved / tax implications etc at both ends? Thanks

[Marisawright]

I haven't done it, but I was planning to, so I looked into it. 

I had investment properties in Sydney and Darwin for many years, and even though I lived in Australia, I might as well have been overseas.  I never inspected the Darwin property, and I only inspected the Sydney ones a handful of times out of curiosity.  You can get your agent to take photos (and now videos) so it's not necessary to visit.  In all cases I chose my agent carefully and insisted that I was involved in the choice of every new tenant, (I didn't meet the tenants, I just had sight of the applications).

Tax implications:

The good thing about Australian property is that you claim a set rate of depreciation every year as a tax deduction, regardless of the state of the property.  That can substantially reduce the tax you pay. At one stage, I owned a brand new investment property, and the "depreciation" was so high, I didn't pay tax on the income at all.  The older the property is, the less depreciation you'll get.  So your first step is to get a valuer to do a depreciation report—it's a very common thing so very easy to get done.

You submit your Australian tax return like normal, declaring  your Australian income.  The bad news is that you'll lose your tax-free threshold and you''ll pay tax at a fixed rate. Remember when calculating the tax due, you can claim the depreciation, plus the interest on the mortgage, not the whole mortgage amount.  Your bank can tell you the split (again, it's a normal thing so easy info to get).  In the early years of a mortgage, you're paying huge amounts of interest and hardly any principal, so it might not be too bad.

I decided to sell my properties when we moved to the UK (which I bitterly regret).  We had every intention of settling, and I was worried about Capital Gains Tax.  As a foreign investor, you pay double the CGT than you would as an Australian resident. On top of the higher annual taxes, that was too much for me, so I decided to sell and I wish I hadn't, because we came back to Australia after all.   

I forgot the old rule - remember that if you're paying tax, it's because you made a profit.  Don't be greedy.

[rammygirl]

We did it for a while (6 years or so) while we were in Uk. We always intended to return to it and now live here.  As Marissa says you need to file an ATO tax return and you pay a fixed rate on all the profit. You also declare on Uk tax return and any tax paid to ATO is set against tax due in Uk, but unlike Aus only set against rental income not earnings. The allowances in Uk are less so there is often Uk tax to pay.

We didn’t have a mortgage so circumstances do differ, we also had a very good agent who we knew pretty well and a dual qualified accountant to do both returns.