Kiwipaul

I've filled in now 2 Australian tax returns and in process of doing a third. Only on the supp Tax return do they refer to foreign rental income and then all they want to know is the total income, nowhere do they ask for cost, mortage payments, etc. In fact I didn't include this income the first year, but in the 2nd year I querried it, and discovered I was doing it wrong and sent a correction through, for 1st and 2nd years.

Didn't involve me having to pay any extra tax.
During the clarification, I requested written confirmation and got 10 pages of Gobble de Gook from commissioner of taxes explaining it, which was supposed to be in plain English. They obviously speak a different English to me.

renth

Do you deduct agent's fees, lawnmowing etc...?

Kiwipaul

I just declare the total rental income with NO deductions. It also says if you are making a loss make a note of this loss and keep for future reference, to use against future gains.

So I do.

I also have to submit full tax return in NZ, and their I've built up a $50,000 loss due to all these expenses and depreciation.

Alan Collett

As I said yesterday Paul, this requirement to remit an amount equal to 10% of the interest paid to an overseas lender sits outside the self assessment income tax regime - you won't find any reference to it on the tax return.

Best regards.

Kiwipaul

So who is going to tell me to pay this if the Tax office don't ask for it. They obviously know I've got the property as I've had a written ruleing on tax implication (didn't want one just wanted a simple explanation).

Ignorance is bliss sometimes.

Alan Collett

As a general observation, and having experienced the UK Inland Revenue and Australian ATO, the latter has a lot to "learn" in terms of ensuring compliance with the tax legislation.

However, with Federal Government revenues coming under pressure there is an understandable reluctance to raise taxes any further (there are only so many "levies" a Government can introduce) => I sense that the ATO are going to get tougher with taxpayers over the next few years - which is good news for the accountants, but not for the rest of the population.

This from today's papers:
http://www.moneymanager.com.au/artic...064220083.html

Best regards.

renth

Just answering my own question after visiting the ATO site:

==================================

There are four categories of foreign income to consider
here:

• interest income
• modified passive income—passive income other than interest
• offshore banking income
• all other assessable foreign income.

STEP 1 For each category work out the assessable
amount of your foreign income. If you had
foreign tax taken away from this income, add it
back to the amount you received.
Write this amount on your notepaper in the
column for ‘Assessable amount’.

STEP 2 Take away from this assessable amount any
deductible expenses incurred in relation to
earning this category of foreign income.

============================

Alan Collett

Consider this Paul.

An ATO audit officer decides to identify all taxpayers who have foreign income from property. He/she then checks whether the taxpayer has remitted the required 10% tax. They haven't? Then add back the interest claimed as a deduction => additional tax liability plus interest and penalties.

Or an ATO audit officer decides to look at the tax affairs of all those who have recently moved to Australia from the UK to ensure compliance with the Foreign Investment Fund Rules.

It only takes someone to be switched on inside the ATO for there to be some significant tax at stake.

Best regards.

Kiwipaul

They cannot expect us all to be tax experts, especially when their is nothing in either the tax return or Sup tax return referring to this. Nor is their anything on any of their documnets regarding foreign income or rental income.

The only time I've ever seen a ref to this is from your documents so it must be well hidden in tax law (as far as I'm concerned ).

Don't think they can expect Joe Public to wade though the whole of tax legislation to make sure they are paying every tax they should be. I've never hidden the fact I've an investment property so it's up to them (tax office) to inform me of any taxes I'm liable for or at least make me aware of where I can find the info.

Alan Collett

Sadly not Paul ... you are expected to get it right first time under Self Assessment. Which is why we accountants are here ... :-))

Best regards.

mikeburt

thanks forall that Alan.I'm going over on a 457ie so want to keep a property in the UK as a safety net in case things don't go as planned.From what you are saying,as a tax resident in Australia I would be liable for CGT in Australia if I sell!Obviously only on the "gain" though-could you clarify the double taxation treaty in that case-does it not apply with regard to CGT at least for temporary residents?

Alan Collett

Sadly there are no exemptions in Australia in respect of capital gains realised by an Aussie tax resident who is the holder of a temporary residency visa on the disposal of an overseas property Mike (so far as I recall => not categoric advice as I haven't reviewed my reference books).

Best regards.

mikeburt

cheers!Alan-looks like I won't be selling it then!