jacknscoob

Hello

The inland rev have just sent us forms here in Oz for us to declare that we have permenantly left the UK, does anyone know the implications of this.

Implications for this as taxation reasons.

All help appreciated.

NikiL

If you have no income through the UK now its all good - you can claim a rebate for the tax paid during your last year in UK. If you do still have income from the UK you lose your tax allowances.

JAJ

Unclear what you mean by this.

NikiL

Reading it back it was as clear as mud really

If someone is in Australia, and has income originating from the UK (pension, rental etc) as a non UK resident they are no longer entitled to the tax allowances that they would have had as a UK resident providing the funds remain within the UK.

Presumably this would be taxed by the Australian Taxation Office instead of HMRC if the funds were paid to the individual within Australia.

JAJ

Which is not true. British citizens (and many others) living outside the U.K. remain entitled to the personal allowance, plus the lower rate tax bands.

Unless the person was on a temporary visa (eg 457) and met certain other criteria, Australian tax would be levied on world wide income. Whether or not it was brought into Australia.

A credit would usually be available for any U.K. tax due.

NikiL

Fair enough, I stand corrected - I had been told this was the case with the UK income, but very happy to be wrong!

donovandenese

the UK and Australia have a double taxation treaty so you will only be taxed once on any income, basically in the country where you are "tax resident". For the UK not to tax you on any UK income (eg bank interest on any monies left in UK banks, rental income etc) you will need to complete the forms to state you have left the UK permanently. This income would then be taxable in Australia.

Fly Away

I'm sure that I have read on BE that if you make a loss on rental income in the UK, you are not allowed to offset it against tax due in either the UK or Oz. Is this true? Mighty depressing if it is true as we will make a loss on renting our house out if we can't sell it.

donovandenese

uk - rental losses can only be offset against rental income - not other income eg salary
oz - rental losses can be offset against any income (currently this is raising debates in oz as the ATO is losing alot of money with people renting at a loss and offsetting this against employment income)

what I'm not sure about though is whether UK rental losses can be offset against any oz income

Fly Away

Thanks. That's what I had read too... I hope losses here CAN be offset against income in Oz..

RenShen

When you leave the UK you should ask HMRC (Inland Revenue that was) for a form P85. You might get a tax refund depending on your circumstances.

Basically, for most employed people, the tax free annual allowance (around 5K) is split into 12 (if paid monthly, 52 if weekly) and set against your wages. You then pay tax of what's left. If you leave the country part way through the year, you are still entitled to the full annual amount of tax free allowance.

e.g. if you leave 6 months into the year, half your tax free allowance has been used against your wages and you have paid tax on the balance. You complete form P85 to confirm you have left the country and HMRC recalculate your tax, allocating ALL your tax free allowance against your 6 months pay, and you get a refund.

Hope this helps,
Ren (Revenue bore of the year!!)

JAJ

U.K. source income is always taxable in the U.K., but subject to the personal allowance for most people.

Any U.K. tax due can be offset against Australian tax.

isgraham

No you can't do that unfortunately

http://www.ato.gov.au/large/content....tent/65779.htm

you can only offset against the income that the property brings so you can deduct the interest portion off the mortgage payments from rental income as you can with management fees and maintenance. If however you still make a loss then you have made a loss and can't offset it against your Oz tax.

Fly Away

Thanks Isgraham. I was afraid that would be the case. We would be renting our house if it doesn't sell. We probably won't earn more than the expenses.

RenShen

We are in the same boat with our house. We have looked into converting our mortgage to interest only if it doesn't sell in time for the move. Brings the repayment down quite a lot but then we are not actually paying anything off the capital till it sells.

Heard so many horror stories about renting though so will probably leave it empty. Also, an empty house is easier to sell (I hope!!!)