Bix

Hi Nikki,

If you have not done so already go to see a mortgage advisor or mortgage broker. There services are free to you as they get a kick back from the lender they introduce you to. We used an Advisor and although they only deal with a selection of companies we reduced our mortgage considerably.

For the remortgage I gave the criteria that I wanted as long a term as possible and a mortgage with no early redemption penalties. This keeps the monthly repayments to a minimum and allows me the option of early settlement at any time should I wish to sell the house when the UK market improves again......1 year, 2 years....who knows ?

I had no problem getting the funds as even after the remortgage I still have 75% equity so not at all comparable with yours I'm afraid.

A good point you touch on is permission to rent.
This is required from your lender but also insurance company.
I had a combined buildings and contents insurance with Zurich but they do not allow rentals so I had to cancel it and go elsewhere.

BTW my rent only just covers the mortgage & insurances.

Bix

Thanks G.
Yes, I think that is right but I am not to sure about what can be offset against it yet.
Maintenance, repairs, agents costs, etc.
Mortgage interest ?

Jacko1

Correct, many people forget this until it comes to the annual tax return (potential big bill)

Paul J

amansingh

True, but what if you don't have a mortgage when you rent the house out?
The whole rental income is taxed I believe....unless what one is paying for rent/mortgage in Oz can be offset (a pain in the butt by the sounds of things)

Why not just not bother to file a UK tax return when you've emigrated to Oz?.....another reason to make it work in Oz and never move back, rather than just move back here after a few months like so many seem to do, without giving the new life a fair crack of the whip

Grayling

you do not pay tax in England as a non resident landlord but you have to pay tax on worldwide income (including rental income) in Australia:

www.ato.gov.au

Tax evasion is a crime.Depends if you want to take the risk.

G

sackofspuds

Are you sure about this? I have a property I rent out in the UK. On my tax return it states that if I become a non-UK tax resident then tax must be deducted by the rental agent or deducted by the tenant unless I have a specific exemption from the Revenue.

ABCDiamond

This ATO link http://www.ato.gov.au/individuals/co...1/002&st=&cy=1 gives some info on overseas rental income, and states that any net Profit or Loss is taken into account in the Australian Tax Return. However, overseas losses can only be offset against profits of the same category.

If your related mortgage interest, agents fees and other related costs exceed the rental income, then you are in a loss position, and no tax is due.

However, if you are mortgage free, then you will, in all probability, be due to pay a ceratin amount of Australian tax on the net income.

Under Australian rules the allowable Mortgage value cannot exceed the original mortage value at time of property purchase. Therefore I am not sure if taking out a new mortgage would actually be tax deductible. It isn't allowable on an Australian Investment property, and so I would think unlikely on a UK one either.

One way around this is to sell the property to another "tax entity", and have the property and mortgage in that name only.
eg: If husband and wife own the property, then sell it to just the husband (or wife) who then has the new mortgage which should be allowable.

If you consider following my ideas, I do suggest very strongly that you get "upto-date" professional advise on this before going ahead.


On the UK side of things, some further info from the link that Bix mentioned.

ABCDiamond

Anything that is related to the property.

eg: Here in QLD I can claim the cost of flying down to Sydney to check on my investment property, motel accommodation, other travel and food costs. But only if I do not use the trip as a part holiday aswell.

My wife flew down last year, spent three days cleaning and painting the place for new tenants, all costs deductible.

Now, I am NOT suggesting that a trip to do an inspection in the UK will be 100% allowed, but the rules do seem to say it will

However, Maintenance, repairs, agents costs, Mortgage interest, bank fees, etc are all allowable costs to set against rent.

sackofspuds

Can you just confirm this - that you have a mortgage for only 25% of the property's value but the rent only just covers it?

sackofspuds

The thing is, at the top of this page it clearly says:

"even though the rent may be paid with no tax deducted, it remains liable to UK tax. So non-resident landlords must include it in any tax return the Inland Revenue sends them."

Do you think that when you get your self-assessment form you simply tick the box that says Non-Resident and hey presto, it's only the Australian Tax Office you need to deal with?

ABCDiamond

It does make sense that any net profit is taxable in the UK, and the exemptions should really only be used by those who do not expect to make a taxable profit.

However, any UK tax paid will also be taken into account when making the ATO return, so that you don't get taxed twice. If UK tax is due, but isn't paid, then the Australian tax system will get all the tax, as you can't offset what hasn't been paid !!


Some examples of Allowable expenses in the UK

Bix

Have checked the actual figures and the mortgage comes to 32% of house value.

Monthly outgoings for payment of mortgage, payment insurance, endowments, house and contents insurances come to within GBP 120 of the rental income.

But after taking out the agents fees it just leaves GBP 10 per month profit.
It cost me GBP 60 to set up any new tennant so if I have two in a year that wipes out the profit.

If any maintenance or repairs are necessary I would have to supplement that from my Aus account.

sackofspuds

I'm gobsmacked.

Bix

About what ?

DIMO8

[QUOTE=Bix]Hi Kay,

Yes, we really, really wanted to sell too.

We are using a professional renting agency.
Charge GBP 60 for setting up each tennants contract then 12% of the rental.
We were going to rent furnished but were advised against it as any slight problem with anything would be our responsibility.
We have only left curtain and carpets so have a small contents insurance covering that.
Have the usual buildings insurance.

You make out forms with your agent stipulating the type of tennant you will accept and they vet on that basis.
ie smoker / non-smoker - pets / no pets - kids / no kids.
Remember though the more restrictive you are the harder it could be to find tennants.

They arrange periodic inspections, arrange any wear and tear maintenance or any emergency repairs. Cost of repairs is to our account / claimed against insurance (have had none so far).

Hi Bix

Very good post and lots of interesting points...i just wanted to know you said you rented unfurnished...so did you put your furniture into storage in UK or did you ship it out and then rent an unfurnished house.

Thanks Donna