kris

Hi,
Sorry about the dull question but what is this for?
I'm going on 4 year Businesss Visa but only planning on staying a couple of years.
If I fill it in do I lose my UK tax free allowance, ISA allowance etc.
If I don't are there any negative effects?
Don't have long - leaving on Friday morning so appreciate any advice.
Thanks,
Kris

Sandra

You are stating you will be leaving the country and therefore not taking advantage of your full tax allowance by earning for the rest of year? You may be entitled to a Tax Refund for the tax year 2002/2003 - this may be a simplified answer and if you have other tax liabilities it might be wise to talk to a UK/Aus Tax consultant. Even on a temp work visa you do not get the full tax allowance in the UK and AUS at the same time.

cheers

Alan Collett

It might be dull to you, but to us accountants, well ... :-))

In answer to your main question, the P85 form is used to establish your non-UK residence status and as a by-product usually generates a tax repayment if you have been in salaried employment. This is because personal allowances and the tax bandings are effectively given to you as to 1/12 each month under the PAYE system, whereas you are actually entitled to a whole year's personal allowances and tax bands even if you leave the UK part way through a tax year.

ie. If you cease employment and leave the UK after 10 months of the tax year you have 2 months of personal allowances that have not been used.

This said, if you have untaxed rental income in those last two months the tax repayment can turn into a payment position - to be determined once your UK Tax Return has been prepared.

And in future UK tax years you retain your entitlement to UK personal allowances, which can be used to absorb any UK source income (net rental income, UK source investment income, etc).

Best regards.

Sandra

Ok sorry Alan - I got this wrong - I thought you couldn't have income in the two countries, ie rental here in the UK would be taxable in Aus?


cheers sandra

Alan Collett

Re your point about the tax allowances Sandra: are you sure?

A UK citizen (and indeed any Commonwealth or EU citizen, amongst others) retains a right to a UK personal allowance, even if non-resident.

Similarly, someone who becomes a tax resident of Australia (such as someone on a 4-year 457 visa) would be considered to be a tax resident in Australia from arrival and would therefore have a tax free threshold available (albeit pro-rated in the year of arrival).

Best regards.

Alan Collett

Sandra,

Rental income is technically taxable in both the UK and Australia -presently.

I say "presently" because legislation currently before Parliament in Australia will exclude investment income deriving from outside Australia (such as net rentals from UK property) as well as overseas capital gains from the charge to tax in Australia for those who are in Australia as temporary residents.

Tax planning tips to follow on the Go Matilda website once the legislation is passed ...!

Best regards.

Sandra

OK so the wording of my explanation is incorrect but basically, excluding the possible changes to rent income, you do not get the real advantage of two tax allowances one in each country. While in Aus my world income is assessed at Aus tax rates, regardless of any personal tax allowance I might get in the UK. Is this correct ?

Many thanks for your guidance, your site and the information sheets you send out for free have been invaluable over the last nine months for me

Cheers

kris

Sandra, Alan,

Thanks for your replies. In summary it sounds like I should fill in this form as it will entitle me to an income tax refund on 2002/2003 salary. It will not mean I lose future UK tax free allowances (for rental income) or ISA entitlements.

Currently I should be taxed in Oz on UK rental income (harsh!) but legislation may change this (much better!). Any idea when? Incidentally (assuming I don't tell them) how would the OZ tax authorities know I was receiving rental income into a UK bank account. Do the UK and OZ tax authorites share information?

Thanks again,
Kris

Alan Collett

Kris,

The expectation is that the legislation will be passed any day now (which is to be backdated to 01/07/2002 I believe) ... and I'd also work on the assumption that the ATO and the IR CAN exchange information, even if they don't often do so.

Best regards.