Renting out your foreign house and paying tax??

[Guest Jo908jo]

Hi I was wondering if anyone else has a property abroad which they are renting out and how this worked with the tax return? Do we pay tax on this? how do we work out what the income is and do we pay tax in the UK or in Australia if we are due to pay tax? im a bit confused and wondered if anyone else had this issue?

 

thanks

JO

[Guest Guest12727]

I believe you would pay tax here as you are resident in this country. Assuming you completed the relevant forms before you left UK stating you were no longer a resident for tax purposes. On the tax return there is a section for foreign income, so this is where it would go. It would be your rent minus any expenses such as mortgage repayments, upkeep, bills and agent fees etc I guess.

[Andrew from Vista Financial]

Hi Jo

 

Firstly what is your Australian Visa situation i.e permanent or temporary?

 

Andy

[TonyD]

So I assume from the above logic that as a 457 visa holder who is going to be losing about £100/month due to the rent I'm going to get on our UK home not covering the mortgage I could get tax-relief?? - I bet not!!

[TonyD]

Also, I was not aware of any form I had to fill in to tell the taxman I was no longer resident! Have you any mre details Howde please?

[Guest Guest12727]

So I assume from the above logic that as a 457 visa holder who is going to be losing about £100/month due to the rent I'm going to get on our UK home not covering the mortgage I could get tax-relief?? - I bet not!!

 

Not sure how different Visas effect this - I am sure Andrew will know

 

Can I negative gear the overseas investment property against my Australian income?

The short answer is yes.

Previously, any net foreign loss incurred by an Australian tax resident could only be offset against other foreign income of certain classes.

From 1 July 2008, any net foreign loss incurred may be offset against any Australian sourced income derived. If the foreign loss is not used, it may be carried forward indefinitely to offset any future income derived, regardless of whether the future income is sourced from Australia or otherwise.

There are transitional rules that govern how certain foreign losses incurred before 1 July 2008 may be converted to ordinary tax losses to be offset against Australian domestic income. These rules are complex and certain calculations are required to determine how much of the foreign losses may be converted to ordinary tax losses and utilised.

from http://www.yourinvestmentpropertymag.com.au/article/6-allimportant-tax-issues-you-need-to-know-when-investing-overseas-117591.aspx

[Guest Guest12727]

Also, I was not aware of any form I had to fill in to tell the taxman I was no longer resident! Have you any mre details Howde please?

 

Well it was 10 years ago in Jan, so can't remember the specifics, but definitely know we completed something. I have looked at the HM Revenue and Customs website and think it might be the P85 http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=5Ay4eloD0nw&formid=766

[TonyD]

Thanks Howde, just been on the tax office website and found the P85 - thank goodness for you mentioning it or I'd never have known!

[Guest Guest12727]

This may be of interest to 457 visa holders

http://www.exfin.com/457-tax-financial

[Andrew from Vista Financial]

So I assume from the above logic that as a 457 visa holder who is going to be losing about £100/month due to the rent I'm going to get on our UK home not covering the mortgage I could get tax-relief?? - I bet not!!

 

Tony unlikely due to your temporary visa status.

[Andrew from Vista Financial]

Thanks Howde, just been on the tax office website and found the P85 - thank goodness for you mentioning it or I'd never have known!

 

Tony have a look here re the Non-resident landlord scheme http://www.hmrc.gov.uk/international/nr-landlords.htm

 

and here NRL1i application form http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=Ed5BaOnynis&formId=738

[Mezzi]

Hi Jo

 

I have been here just over a year and just did my first UK and Aus tax returns as I rent out my flat in the UK. I couldn't submit my Aus tax return until I had done the UK one, as that info needs to be factored into the Aus one and I used an accountant here to do my Aus one as I thought it'd be safer!

 

When I attempted to get a tax refund before I left the UK last year (had worked 4 months of that tax year), HMRC automatically sent me the Non-Resident for Tax Purposes forms as I had to declare my UK property on the tax back forms. They wouldn't give me a tax refund until I had completed my first tax refund. The Estate Agent that manages my flat also told me that I needed to let HMRC know about my residency status and I had to send them proof that I had let HMRC know and so they know not to take tax off the rental income.

 

I did end up paying some tax in the UK in this return (depends on how much profit you make though, the threshold is £8000 for the tax year, I didn't make much out of the flat but I had my earnings as well which pushed it just over the threshold) and the accountant here told me that I wouldn't be taxed here as well since the UK and Aus have a tax agreement not to double tax you.... More than that I could not tell you, but hope it helps!

 

Maeri-Anne

[Guest Jo908jo]

Hi sorry not been on in a while we are perm residents but no we didnt complete a form saying we were no longer resident for tax purposes should we do this now? we dont make any money as we still have payments to cover in the UK sending money back but iv heard you only get relief on the interest part of the mortgage only is this correct? is it worth paying someone to help us with the tax return this year?

[Guest Jo908jo]

hi mezzie, who did you use to do your tax return? also did you do a UK tax return online? my hubby worked until June and prob pushed us over the threshold so i presume we will have some tax to pay, did you pay this in dollars or pounds? x

[Guest flioeawert]

Yes we have to pay the tax for the property but not directly to the country where your property is located but in the country where you reside so it is one and the same thing another issue with respect to tax return there are many different rules related to it consulting or taking advice from an financial firm would help you but IMO it is based upon the rent of your property and the other services you are giving to your tenant.

[Alan Collett]

Hi Jo

 

<snip>

 

I did end up paying some tax in the UK in this return (depends on how much profit you make though, the threshold is £8000 for the tax year, I didn't make much out of the flat but I had my earnings as well which pushed it just over the threshold) and the accountant here told me that I wouldn't be taxed here as well since the UK and Aus have a tax agreement not to double tax you.... More than that I could not tell you, but hope it helps!

 

Maeri-Anne

 

 

Hi Maeri-Anne.

 

That comment is incorrect - sorry.

 

If you are living in Australia as a permanent resident or citizen your UK source rental income is taxable in the UK and in Australia.

 

If you are a UK citizen - or indeed an Australian citizen if not a UK citizen - you are entitled to a UK personal allowance which often mops the entirety of the net rental income, particularly in a UK tax year where there is no other income (eg employment income).

 

If you do pay UK tax on your UK rental income you should be able to claim a foreign tax offset on your Australian tax return to reduce the Aus tax payable on that same source of income.

 

See also: http://www.gmtax.com.au/faqs/ , and remember the need to lodge a 2013 UK tax return by the end of this month to mitigate any late filing penalties.

 

Best regards.

[Alan Collett]

hi mezzie, who did you use to do your tax return? also did you do a UK tax return online? my hubby worked until June and prob pushed us over the threshold so i presume we will have some tax to pay, did you pay this in dollars or pounds? x

 

Non UK residents have to complete the Residence supplement to the UK tax return, which can't be lodged online via the HMRC website:

http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=9EhVkBVcjmE&formId=3191

 

This means that you must:

 

* Lodge a paper tax return (only possible up to 31 October following the end of the UK tax year), or

 

* Buy tax software that will allow you to lodge the UK tax return with this supplement, or

 

* Instruct a firm of accountants who can e-lodge the tax return with the required supplement.

 

Best regards.