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harry

Taxes on UK Rental

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Hi,

 

My family and I are moving to Perth later this year, and I am confused after reading the rules on Taxation! (who isn't)

 

We intend to LET our house in the UK.

 

Will the income tax on the rental be due in the UK or Australia?

If tax is paid in UK, would we retain our tax free allowance in the UK?

If tax is paid in Australia, would we be able to offset mortgate interest under the Aussie rules (rather than UK rules that are phasing it out)

 

Thanks!!

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Hi Harry

 

Good luck in your upcoming move. My family have moved to Perth a couple of months ago and I will be joining them shortly as I work my notice in the UK. We too are renting a house out, so I can offer some advice:-

 

1. In principle, income tax is due in both the UK and Australia, albeit any UK tax paid is then deductible from your tax liability in Australia.

2. Yes, you absolutely do retain your UK tax free allowance and if the house is in joint names (yourself and your wife), then you get two lots of taxable allowances.

3. Yes, the tax liability in the UK may (and likely will) be different to the liability under Australia. In Australia you will get the benefit of interest payments for the buy to let mortgage. The down side in Australia is typically you won't benefit from a taxable allowance on foreign earnings (from memory).

 

It is worth looking at tax deductions available in Australia. For example, if you had to make a visit to the UK for the purposes of attending the property, then this trip is tax deductible. Clearly, if you then have a family holiday, you will ned to pro-rata the deduction accordingly.

 

Good luck with the move.

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Just remember, you are going to be 'Resident' in Australia for tax purposes, so any income from your rental in the UK is taxable in Australia, there is a double taxation agreement in place, so you may not pay tax in the UK due to your personal allowance, but you will most certainly pay tax is Aus, it will pay to get a good UK/AuS accountant who deals with both, we had ATO nightmares when we had our house rented out in the UK, then even more when we sold it.

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4 hours ago, Alan Collett said:

Hello Harry.

What subclass of visa do you have?

Best regards.

I have a partner 100 VISA

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22 hours ago, harry said:

I have a partner 100 VISA

Then your UK rental income (after deducting costs that are allowable for Australian tax purposes - including depreciation) is taxable in Australia from the date you become a tax resident.

The rental income is also taxable in the UK, but may well be covered by the UK personal allowance, to which you remain entitled.

Expect to be required to complete a tax return in both countries.

Also Google Non Resident Landlord Scheme.

Best regards.

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