Hi,
I hope someone can offer some advice on my situation.
I own a rental property in Canberra and work in Asia. It's been a couple of years now and it's all been fine. My status is still resident of Australia and my plan is to return in a couple more years. My tax is up to date and my accountant mentioned recently that I may need to change my status to non-resident for tax purposes. No worries.
However, I have just recieved a letter from the ATO stating that I will have to pay what amounts to about 30% of the rental income as tax. It amounts to 3 times last year's $3000 tax bill (last year's tax bill was mainly due to my HECS debt).
My question is, what am I missing here? The letter came directly from the ATO to my overseas work address, there was no mention of my overseas working status, just a PAYG requirement which treats rental income as sole income, and taxes that income accordingly.
My other question is, what am I paying tax for? I'm not using any services in Australia, and I'll be here for about 2 more years.
Sorry about the half-rant here. My accountant seems to have gone quiet and has not answered my email, and I won't get a chance to phone the ATO till next week.
If anyone knows or suspects what may have happened I'd really appreciate some advice.
If not, could someone recommend a savvy accountant (Canberra-based) who is familiar with overseas property owners/landlords?
Thanks for any help.
Ben.Hello Ben
I don't know the rules about how long you can be a resident of Australia for tax purposes and not live there but it seems as if you may have reached the limit.
For the ATO your rental income is your only income in Australia. Your salary will be taxed in the country you are earning it in. The reason that your tax will be about 30% of your rental income is that ,as a non resident, your taxed at a different rate.
There is no $6000 tax free group and also no 15% tax group. You jump straight into paying 29c from the first dollar earned.
Here is a link to the ATO site which shows the non resident rates.http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm&mnu=5053&mfp=001
I assume you mean 30% of your net rental income i.e. after deduction of all expenses including interest on your mortgage, which means that your property is CF+ ?.
Every country makes you pay tax for money earned on it's shores. At least you will not need to pay the medicare levy any more.
If you are into shares the thing to take advantage of while you are a non resident is the rule that you do not have to pay CGT on any shares CG in Australia. Of cause you will first have to check what the rule is in your situation in the country where you are now residing about CG on shares in another country. It may be that since your only living there for a few years for work reasons they may treat you as an expat and not be interested in your worldwide income.
For example I live in Belgium and they do not tax CG on shares, here only on the dividends, so that's great for me. However I do get caught paying about 55% tax on fully franked dividends. The 30% company tax already paid in Australia on the dividend and a further flat 25% here.
You may like to brows through the ATO site. It's actually very informative.
Hope this helps
ElkaHi again,
Thanks for your reply Elka. That link was what I was looking for but couldn't track doen on the ATO site. Yeah the property is CF+ and the tax is after all deductions. Unfortunately that 30 % was the 'cream' and the property is now breaking even.
As my accountant hasn't gotten back to me yet I'm trying to find out if the tax I now pay is treated like regular income, ie. does part of it go to my HECS debt, when I put in a tax return on this small income does part of it come back as a refund etc, etc? That would soften the blow a little but still it kind of takes the sheen off things for me.
Anyway, I'm grateful to have the property and have had a good run with it so far.
Thanks again. This is a great site and forum,
Ben.Hello Ben
Think long term.
I assume working overseas that your on a good salary package and don't need your rental income at this time.
By the time you get back your property should be even more CF+ and should have grown in value.
Here is a link to the ATO site about the HECS scheme and repayments and should help you find answers. You have to repay the HECS debt sooner or later and my personal preference would be sooner, specially if you are in a situation of good income and few debts.Enjoy your time overseas
Elka
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