UK rental income and Oz tax returns

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UK rental income and Oz tax returns


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Old 9th May 2009, 07:20 AM
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Default UK rental income and Oz tax returns

Just thought I would post some clarification on this since before on this forum a member posted that you could pay tax in Australia on income from UK rentals.

Now we're here from UK and Ireland on Australian PR (skilled independent visa).

This is the question that I asked HMRC (Mer Majesty's Revenue and Customs) in the UK.

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I am a non-resident landlord since I moved from the UK in July 2007. I realise that I have to complete a UK tax return although I am now an Australian resident. A friend has mentioned though that I don't have to pay the tax in the UK but can pay in Australia. Is this true? I've been through the FAQ on the website but couldn't find the answer and it didn't seem as though the double tax treaties cover rental income. At the moment I am paying tax in the UK and tax in Australia and just want to check that I'm doing the right thing.

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Here is the reply:

The rents that you receive from letting your UK property are liable to UK tax and cannot be exempted. You may have received approval for your rents to be paid without deduction of tax but you have to account for any tax liability you have on your rents under Self Assessment.

Income tax remains chargeable on UK rental income even where the landlord is non resident for UK income tax purposes. HM Revenue & Customs retains the right to tax UK rental income and there are no Double Taxation Conventions that transfer this right to any foreign authority.

If the rental income is also charged to tax in your country of residence, then that country should give the relevant Tax Credit for the UK tax paid.

Most Double Taxation Agreements only provide relief for interest, royalty and pension income.

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So I think this means that we keep paying tax in the UK on any rental income through the UK tax returns, and we keep putting in it in Australian tax returns (since here we are taxed on all world income) but they either won't tax us or will give us a tax credit if they have taxed us on it.

This is our first tax return as Australian residents and it will be submitted soon by our accountant.

Thought this might be useful for anyone in the same situation.

Regards,
Karen

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Old 7th August 2009, 09:10 AM
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If you're accountant in Australia suggests you should be paying tax on your UK income, you should seek further advice.

John

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That info didn't mention my accountant - that was the advice from the HMRC in the UK.

Regards,
Karen

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Old 7th August 2009, 09:19 AM
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I was referring to the fact that you said the UK income wasn't going to be taxed in Australia. Under some circumstances it could be taxed. It is necessary to ensure that the Australian tax return is submitted correctly and that if there is a potential tax liability in Australia, the situation is reviewed - a number of things can be done to avoid Australian tax on foreign rental income.

John
Sorry if I wasn't clear - we're not being charged Australian tax on our UK income but we understand that it still has to go into the tax return.

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Old 7th August 2009, 09:29 AM
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So long as you're sure there's no Australian tax then you should be fine. Have you also considered LAFA tax allowance?
If you mean LAFHA (Living away from home living allowance) I'm a permanent resident in Australia so LAFHA doesn't apply (and I also work from home ).

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