comparing tax benefits in different countries

[ellejay]

I'm thinking ahead to possible retirement destinations and have some income from rentals (one in UK and a few in NZ). The NZ profits are taxed at 28% by NZ tax office, which is okay, but the UK one falls under the tax free threshold so no tax payable in UK (although I realise I'll have to pay tax in Aus). I can't find any info on whether or not the Australian tax free threshold applies to rental income. Meaning if I was resident for tax purposes in Australia and the income from all properties (divided between two of us) fell below the threshold there'd be no tax to pay on it, and possibly a loss to carry over from any tax paid in NZ. Or is it that rental income isn't included in the tax free threshold?

 

[Paul@PFI]

I'm thinking ahead to possible retirement destinations and have some income from rentals (one in UK and a few in NZ). The NZ profits are taxed at 28% by NZ tax office, which is okay, but the UK one falls under the tax free threshold so no tax payable in UK (although I realise I'll have to pay tax in Aus). I can't find any info on whether or not the Australian tax free threshold applies to rental income. Meaning if I was resident for tax purposes in Australia and the income from all properties (divided between two of us) fell below the threshold there'd be no tax to pay on it, and possibly a loss to carry over from any tax paid in NZ. Or is it that rental income isn't included in the tax free threshold?

In each country you need to consider the tax scale and rates that apply to a non-resident v's a resident. Each are similar but also different.

- Australia provides no threshold to a non-resident.
- UK provides an "allowance" to some taxpayers. This varies with age and other factors.
- NZ adopts a position not unlike Australia but gives a (low) threshold.

When a person is resident then their WORDWIDE income is taxed in the country of residency and credit given for the foreign taxes paid (AUS, NZ and UK all are tax treaty partners and have the same rule)... However then there is the complexity of timing differences and currency conversion.

You can be resident in ONE country at a time and each country may have a different "test"" for when residency occurs. Generally it relates to a permanent decision to reside - For the countries named.

Personal tax advice is definitely warranted here. You will likely find there isn't a great difference between one and another.

 

[Rob G.]

Some countries have:

annual wealth taxes
property taxes
inheritance taxes
taxes on superannuation benefits

They may or may not apply to assets held overseas.

They also sometimes have forced heirship such that your Australian will may be overruled, at least for property located in their jurisdiction.

They may not recognise asset protection via certain trusts or even tax them as separate entities regardless of your Australian 'tax-effective' distributions.

International tax requires comprehensive advice before acting !

 

[Paul@PFI]

Some countries have:

annual wealth taxes
property taxes
inheritance taxes
taxes on superannuation benefits

International tax requires comprehensive advice before acting !

Yep Rob - Missed that. eg UK will gladly accept Aussie expats in receipt of super pensions. BUT.. what is tax free to over 60's in Aus isn't same in UK. Then dual passports and pensions means sharing of info and one can affect the other.... UK, NZ and AUS all have comprehensive and thorough sharing between all agencies. (Centrelink, ATO, HMC&R, IRD, etc....)...

Remember what is tax free here isn't tax free if you are resident elsewhere.

Then throw a real spanner into it and be ex serviceman or public service receiving a service pension / govt pension etc and its a minefield.

Medicare ??? Move to UK you may be denied some health care benefits and lose Medicare...Not so reciprocal.

 

[ellejay]

Yep Rob - Missed that. eg UK will gladly accept Aussie expats in receipt of super pensions. BUT.. what is tax free to over 60's in Aus isn't same in UK. Then dual passports and pensions means sharing of info and one can affect the other.... UK, NZ and AUS all have comprehensive and thorough sharing between all agencies. (Centrelink, ATO, HMC&R, IRD, etc....)...

Remember what is tax free here isn't tax free if you are resident elsewhere.

Then throw a real spanner into it and be ex serviceman or public service receiving a service pension / govt pension etc and its a minefield.

Medicare ??? Move to UK you may be denied some health care benefits and lose Medicare...Not so reciprocal.

Thanks both Paul and Rob for that and for the replies on the other thread. I had been thinking of moving to NZ but see that every cent of rental income is taxed at 28% there. If I stayed in Australia as a tax resident here I realise I'd still have to lodge a return in NZ and pay the tax but if the net income comes under the Australian tax threshold would any tax I paid in NZ be a loss in Aus that could then be carried against Aus income? All sounds good until I remember CGT!
Thanks so much for taking the time to reply.

 

[Paul@PFI]

Good article in todays press about one of the issues facing many major nations. This one deals with UK tax proposals....Loss of the personal allowance for "non-residents". Level the playing field with Australia .

http://www.smh.com.au/business/british-expats-face-tax-raid-20140812-10342p.html

 

[ellejay]

Good article in todays press about one of the issues facing many major nations. This one deals with UK tax proposals....Loss of the personal allowance for "non-residents". Level the playing field with Australia .

http://www.smh.com.au/business/british-expats-face-tax-raid-20140812-10342p.html

Ah yes, they're onto the tax they're missing out on by not taxing expats who still have a property in UK. It doesn't affect me at this stage as I'm working so over any thresholds and taxed anyway. I do feel sorry for those retirees who've got a house to show for years of work and living a modest life somewhere sunny on the rental income. Still someone has to pay for the tens of thousands of seemingly able bodied who can't work at all for a whole range of reasons.