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Guest terry jones

renting a property in UK living in OZ as perm resident rules for allowable deductions

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Guest terry jones

Hi

Please can some-one help

I have a property in the UK

I have been granted perm residents in OZ and will depart in January 2012

I am going to rent the flat in the UK

I have filled out the UK non residents tax form so will get rent with no deductions

I understand I need to complete a tax form at the end of the year as the UK will have first call on my rental income minus my personal allowance

Since OZ collects on worldwide income I will get a tax credit from the UK and pay any extra tax owed in OZ

So far so good

I have a list of allowable expenses for UK rental income (10% depreciation for wear and tear, repairs, professional services and mortgage interest payments etc - on another matter I do not have a mortgage as I own the home outright and would be interested to know how I should make best use of the tax breaks e.g remortage or not etc)

What I do not understand do I use the UK model for allowable expenses or do I need to use the OZ model.

So I am getting around £13,000 a year in rental income before any expenses and before tax

Do I use HMRC rules for allowable expenses on my UK rental income or the OZ tax rules

 

I would be so grateful for help on this matter

 

Also would welcome any professionals to approach me if they can offer a service to help me through this

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Sorry, can't advice but would be interested in seeing the response as we are also thinking of renting out our UK property (with small mortgage) and renting in Oz. All a bit Greek to us at this stage! Hope someone else on here can give you the answers


VETASSESS lodged 14/11/11 received 22/03/12 | IELTS 16/11/11 Overall 8.5 | WA SS lodged 03/04/12 received 27/04/12 | 176 lodged 01/05/12 CO 29/05 Meds 01/06 PCC 14/06 Visa granted 15/06/12

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For your OZ tax return you need to use the OZ model for business deductions. For your UK return use the UK model. they do not have to be the same. Rental profits/losses are only assessable in Australia once you arrive in Australia.

 

If you were to remortgage the property PRIOR to arrival in Australia, you would be allowed the interest as a deduction in the calculation of your Australian tax liability. After arrival it becomes a bit iffy as the loan may be considered to be personal rather than income producing.

 

This is a three line response and is NOT adequate, or comprehensive tax advise.

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I will be interested in replies too as I haven't been able to get the right responses/ advice so far. I wonder whether you need a specialist accountant here or whether a good UK and good Oz accountant will suffice

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Guest oldmarried

in the UK you don't get 10% wear and tear unless you are renting it furnished.

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<Snip>

 

I wonder whether you need a specialist accountant here or whether a good UK and good Oz accountant will suffice

 

Depends whether you want to deal with two accountants rather than one.

 

In my experience most would prefer to deal with none!

 

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

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Just a further question on the original posters theme (thougt i'd use this thread rather than start another)

 

If after deductions the income from a property is above Zero for a year but less than the UK personal allowance (i.e. no tax to pay in the UK on the rental income), does this mean that I will have to pay tax on this income in Australia? or do i simply declare it on my Australian tax return but i will not be taxed on that amount of income (as it was subject to tax in the uk even though none was required to be paid due to the personal allowance)?

 

I want to meet the person at HMRC who invented the phrase "Tax doesn't have to be taxing!!". if only!!!!

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Yes you will have to pay taxes in Australia.

 

Basically the rule is Australian taxes, less any taxes paid in the UK. So if that's nill, well it's Australian taxes.

 

 

This is a two line response and is NOT adequate, or comprehensive tax advise.

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Thanks thombatt, i thought that might be the case.

 

My wife and i are both named on our mortgage, but have seperate bank accounts in the UK so we could arrange for her account to recieve any rental income only. She is likely to be a lower rate tax payer in Oz than i am, would we both have to declare the income irrespective of this on our individual tax return in oz or if the income were paid into an account in her name would it be just her that gets taxed?

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Hello poolpro.

 

What is your Australian visa status?

 

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

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Hi Alan,

 

I don't have a visa at the moment although am just in the process of applying for a De facto visa as i'm married to an australian. Been married since April 2010 so i suppose i might only get temp residence at first but i'm just trying to get my head round the tax situation for permanent first (in case they grant me that) before i move on to trying to suss out the temp details!!!

 

I feel like i'm trying to evade tax by asking these questions but i'm trying to do so in a legal way!!

 

Cheers.

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If you are married to an Australian you cannot access the exemptions for temporary visaholders generally - so your UK net rental income (after allowable expenses) will indeed be taxable in Australia from the date you arrive there to live.

 

Fortunately that also means that if you suffer a rental loss you can offset the loss against other taxable income in Australia (including salary subject to PAYG). In other words you can what is termed "negatively gear" your UK rental property.

 

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

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If you are married to an Australian you cannot access the exemptions for temporary visaholders generally - so your UK net rental income (after allowable expenses) will indeed be taxable in Australia from the date you arrive there to live.

 

Fortunately that also means that if you suffer a rental loss you can offset the loss against other taxable income in Australia (including salary subject to PAYG). In other words you can what is termed "negatively gear" your UK rental property.

 

Best regards.

 

got me thinking....

 

Can i negatively gear a uk property that's rented out if i enter Australia on a state sponsored visa, with no family ties in Australia?


Chicken, gave me a bad coupon.

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Which State Sponsored visa subclass fbk?

 

A 176 = a permanent residency visa => yes you can.

 

A 475 = a temporary residency visa => no you can't, at least until you secure the permanent residency visa a couple of years or so later.

 

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

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Thanks again for the info.

 

Negative gearing, ok so just reading about this. My understanding is that if the interest in my mortgage exceeds the rental income then i would have negatively geared my investment yes?

 

I don't think i can do this easily, at present i'm on a SVR with my mortgage (and would find it hard to change mortgage due to high LTV as i bought in June 2007- peak of uk market so house now worth less). This isn't so bad in that my rate is 2.99% but it means that my current mortgage payment is approx £860 of which about £400 is interest. I would expect a rental income of about 750-775 on my property so i don't think that normal deductions will get me down to a level at which i make a loss. (i.e. i assume the deductions would need to be over 350-375 a month to make a loss).

 

or am i missing the point?

 

going back to my question on who receives the mortgage, is it beneficial to set the income to go to my lower rate paying wife or will i have to declare it also, even if the income goes to my wife.

 

Thanks!

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Hello again poolpro.

 

The net rental income generally follows the ownership interest => maybe discuss with your solicitor changing the beneficial ownership in the property?

 

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

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