chubbytubby

Hi,
My wife and I have been abroad and renting my house in the UK since mid 2003. I didn't let the tax man know then and now I'm a little concerned that tax I should have been paying will be mounting up and I will be stung with a large tax bill in the future.

I've been told by a relative that I should be fine because the yearly rental income on the house is way below the tax-free allowance that we are entitled to each year. However I can't find any information as to what exactly this figure is.

I guess I will have to fill out a whole load of self-assessment forms to get to the bottom of this, but can anyone set my mind at rest that the tax office are not going to make me poor? Does anyone else have any experience with this?

Thanks in advance!

renth

Depends on where abouts "abroad" is. As this is the Aussie forum I'm going to assume you mean Australia and your relative is correct, if the amount is less tjhan the threshold you wouldn't have to pay tax.

However, the Aussie taxman is also going to want to know about the rent and you might find that you don't owe the UK taxman anything but the Aussie one will want his share (plus fines, penalties and interest).

chubbytubby

Yes, "abroad" is Australia. Never thought about the Aussie taxman. Being a bit of a layman in these matters, can you tell me what my UK house rental has got to do with him?

ABCDiamond

Do you have mortgage interest to offset against the Rent income, to bring down the taxable result ?

OzSheila

If you are resident for Australian tax purposes you are taxed on your worldwide income.

chubbytubby

Hi ABCDiamond,
sure do. works out at about 9k/year

renth

Have you done an Aussie tax return yet? because if the answer is yes and you didn't tick the box asking if you have assets abroad over (I think $50k) and then start declaring rental income and mortgage interest deductions they are going to ask why you haven't told them before.

You need to see an accountant.

ABCDiamond

Are you Tax resident in Australia ? If so, then UK tax is not a problem, as your income from it will be taxed here in Australia.

Alan Collett

- You retain an entitlement to UK personal allowances if you are a UK citizen, even if you are not tax resident in the UK

- If you let out a house in the UK there are HM Revenue compliance obligations you must satisfy as a non resident landlord, whether or not you have an agent acting for you: have you completed forms NRL1 and sent them to the Revenue in the UK?

- Your worldwide income is assessable if you are a tax resident of Australia. Have you included your net rental income on your Aussie Tax Returns? Note that you may be able to claim certain things on your Aussie Return that you can't claim in the UK (and vice versa).

- You should also be aware of your capital gains tax and (probably to a lesser extent) UK Inheritance Tax exposure.

- If you want to explore this more fully (I must get rid of that photo ...!): http://www.collettandco.com/contact.cfm

Best regards.

chubbytubby

Thanks for that.
Maybe i'm being a bit naieve here, but if I don't tell the Australian government that I have a rental property in the UK, how would they ever know??

ABCDiamond

They may never know, but you will also never know if they will ever find out, and, just in case they do find out, make sure your passport is valid, and you can afford a one way ticket out of the country, fast.

renth

If, one day you decide to sell it and you send the proceeds to Australia they will instantly know when the money arrives. They have computers that alert them when any amount over $10,000 comes in to the country. They'll want to know where it came from. They'll also want to know who was living in your house whilst you were in Australia.

Alan Collett

I've not seen an Australian tax audit carried out, but I've seen it in the UK, and it's not pleasant ...

Best regards.

ABCDiamond

I have, hence my "one way ticket" comment

chubbytubby

hmm yeah I bet that's not nice. Lots of frowning and general unpleasentness - A tax equivinent to a full body cavity search I'd imagine.

Ok, so i'll have to tell the Australian government and I guess we will be liable for 22% of the rental income (minus expenses etc..) is it 22% here? I assume it's the same as in the UK?

what should I do if, say I had already filled out an australian tax self-assessment (via 'etax') and had (accidently) failed to mention anything about the UK property? How would one go about correcting this?

....BUGGER.