How do I account for foreign property?

[adamgo1]

In my Australian tax return do I account for it the way I would under English tax law? Or do I use the English method that produces a slight loss. For example;

I have a property in the UK that is furnished. Under UK property tax laws I get a straight line 10% depreciation for this (after body corporate etc). Do I put this depreciation in my Australian return?

If I use the Australian methods for depreciation I will have to estimate it myself because quantity surveyors do little residential work in the UK (doutless because of the above straight line depreciation method). So no UK quantity surveyors have been able to help me compile a depreciation schedule for a UK property. Do I estimate the value of depreciation myself?

I think I have a fair understanding of tax credits, exchange rates etc.

Any help welcomed.

Thanks

Adam

 

[skater]

In my Australian tax return do I account for it the way I would under English tax law? Or do I use the English method that produces a slight loss. For example;

I have a property in the UK that is furnished. Under UK property tax laws I get a straight line 10% depreciation for this (after body corporate etc). Do I put this depreciation in my Australian return?

If I use the Australian methods for depreciation I will have to estimate it myself because quantity surveyors do little residential work in the UK (doutless because of the above straight line depreciation method). So no UK quantity surveyors have been able to help me compile a depreciation schedule for a UK property. Do I estimate the value of depreciation myself?

I think I have a fair understanding of tax credits, exchange rates etc.

Any help welcomed.

Thanks

Adam

My layman understanding is that you would use the UK method for a UK property, but to be sure you would probably be wise to see an accountant that has some knowledge of overseas investments.

 

[Splinter Wood]

I think Skater got it. You would do the UK Tax under their system - THEN submit the Loss/Gain in your Aussie return assuming you are Resident for Tax purposes. I think the L/G is tacked straight onto your assessable income.

I don't however think you can claim losses from offshore , only offset them against other OS income and maybe?? future OS income.

rgds

SW

 

[geoffw]

I don't however think you can claim losses from offshore , only offset them against other OS income and maybe?? future OS income.

That used to be the case, but my understanding is that it changed in 2001

http://www.ato.gov.au/individuals/content.asp?doc=/content/21731.htm&page=1#H1

For income years commencing on or after 1 July 2001, debt deductions are no longer subject to foreign loss quarantining. Instead, debt deductions can now be claimed against total assessable income.

 

[quiggles]

apmlifying on GeoffW's comment, my lay understanding is that funds borrowed in Australia for OS investments are deductible against Australian income. I suspect that funds borrowed OS are not, but I don't know.

 

[julia]

The net taxable income from the UK property is to be determined according to AUstralian tax law for the Australian tax return. You can offset a loss from the UK property against other Australian income providing the loss amount does not exceed the total interest. You would benefit from reading my overseas booklet under free publications at www.bantacs.com.au

Julia Hartman
[email protected]
www.bantacs.com.au

 

[Patosan]

Hey Julia ... love those booklets !

Being os myself I'm keenly aware of the lack of info for non-residents.
A post, like this one, pops up a few times a year.

Great stuff !

 

[adamgo1]

Thank you all

Just about managed to do a return...

A Special thank you to Julia...

 

[Richard Hunt]

With a significant minority of our clients representing offshore investors into Australia (ie either Aust citizens living & working overseas or foreign nationals) and having to field the same general questions each time, I finally bit the bullet recently and developed some simple "Quickstart web-based interactive guides" to help these property investors obtain a preliminary understanding of their financing, FIRB annd tax obligations.

You can either choose to go to the mortgageWerx home page by clicking on the link in my signature and then follow the "Offshore investor" links under the property investor menu, or for a more direct path click on the following links.

Please note: the Quickstart guides are designed to provide snapshot solutions to a range of scenarios based on a combination of employment income types and Australian property characteristic (eg. positive & negative geared properties).

1. Australian citizens working & living overseas (preliminary overview)
www.mortgagewerx.com.au/Property_investors/Offshore_investors/australiansworkingoverse.html

a. Quickstart Guide - Resident for tax purposes​

www.mortgagewerx.com.au/Property_investors/Offshore_investors/quickstartguide-australit.html​

b. Quickstart Guide - Non-resident for tax purposes​

www.mortgagewerx.com.au/Property_investors/Offshore_investors/quickstartguide-australia.html​

2. Foreign nationals (Preliminary overview)
www.mortgagewerx.com.au/Property_investors/Offshore_investors/foreignnationals.html

a. Quickstart Guide - Resident for tax purposes​

www.mortgagewerx.com.au/Property_investors/Offshore_investors/quickstartguide-foreignon.html​

b. Quickstart Guide - Non-resident for tax purposes​

www.mortgagewerx.com.au/Property_investors/Offshore_investors/quickstartguide-foreignoa.html​

IMPORTANT:
The Federal Government announced a number changes to the international tax regime in the 2005 Budget that may impact offshore investors that are NOT reflected in the above links. These changes include foreign source income exemptions for temporary residents, reforms to the CGT treatment of non-residents and the abolition of the foreign loss and FTC quarantining rules. At this stage it is generally expected that these changes will first apply to the 2006-2007 income year.