International Taxation

Discussion in 'WebBoard Property Investor Forum Archive' started by WebBoard, 3rd Sep, 2002.

  1. WebBoard

    WebBoard Guest

    From: Don Fraser


    I don't know if this has been covered before, but does anyone have experience of working and earning money overseas, particularly in the UK and still being able to claim tax losses on properties held in Australia?

    Advice or the name of an accountant (other than the big 4) who works in this area would be much appreciated.

    Don
     
    Last edited by a moderator: 5th Apr, 2017
  2. WebBoard

    WebBoard Guest

    Reply: 1
    From: Lewis O'Brien


    Don,

    There is not a simple answer to the question.

    I assume that you are talking about a person who ceases to be an Australian Resident for taxation purposes (ie moves their toothbrush to the UK for more than 6 months).

    I also assume that the person has negatively geared properties in Australia.

    On this basis, the person will be able to claim tax losses in Australia and carry them forward into future years. When the person returns or their properties start to generate profits then they can offset these against the losses (subject to various restrictions and qualifications).

    However, the Australian losses are unlikely to count as deductions against the person's UK income.

    One final note - if you live in the UK and pay council tax/rates in the UK - some councils will allow a substantial reduction in the tax / rates if you can prove you pay rates on a second property - even if it is in Australia.

    Clearly the above is generalised advice that is grossly simplified. Notwithstanding this, I hope that it provides some guidance.


    Lewis
    FreeLawyer.com.au
     
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  3. Mike

    Mike Member

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    Reply: 1.1
    From: Mike .


    Hi Don and Lewis,

    I am currently working in the UK and will declare myself as a non-resident this financial year. I have already completed my UK tax return in which I declared my UK job earnings.

    I own negatively geared properties in Australia so I will need to file a Aust tax return. Everything Lewis said in regard to this is correct. I can claim all the usual deductions but the overall loss will be rolled over until I return to Australia. By that stage, the yearly rents should cover the yearly expenses and the accumulated loss can be offset against the extra rent.

    "One final note - if you live in the UK and pay council tax/rates in the UK - some councils will allow a substantial reduction in the tax / rates if you can prove you pay rates on a second property - even if it is in Australia." - Lewis

    I didn't know this, Lewis, but it would be a blessing if it were true. I'll check to see if my council know about that. Hope so.

    Regards, Mike
     
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  4. Waverlybay

    Waverlybay Member

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    Reply: 1.1.1
    From: Waverly Bay


    I would agree with the above comments ... but would like to add that the issue of whether a taxpayer is a "non resident" for Australian tax purposes depends very much on the factual situation of the individual.

    Just because you "declare" on the tax return that you are non resident..... does not make you a non resident for tax purposes.

    For example, if an ozzie goes overseas to work temporarily without setting up a permanent home abroad... they COULD still be regarded as oz residents for tax purposes.

    Back to the original question... if the taxpayer is a non resident for oz tax purposes, then as mentioned above, tax losses can still be carried forward for offset later against oz taxable income. However, the oz tax losses generally can not be offset against the foreign earnings.

    If the taxpayer is an oz resident... then their foreign earnings maybe exempt from Australian tax under certain circumstances - - and the the carry forward losses will be calculated according to a formula set out in the Oz Tax legislation.

    If you are going overseas on expatriate terms .... then that is a completely different ball game (tax equalisation could come into play).

    You ask for contacts other than the big 4. . .. but from experience, the wealth of knowledge on cross border international assignments/relocations/ transfers etc is actually in the big 4. Each of these firms has divisions set up for this purpose. Whether oz tax losses can be carried forward ...is just one of many tax issues you will need to deal with. You may also require structuring to ensure your desired residency position is safeguarded.

    I am not sure whether Dale (our resident somersoft tax expert) deals with international employment tax issues - but in any event he is also great point of contact.

    cheers

    Waverly
     
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  5. WebBoard

    WebBoard Guest

    Reply: 1.1.1.1
    From: Don Fraser


    Thanks for the advice, I think that helps for the time being. Obviously I will have to fork out for some advice from the big four, and I'll definitely check about the rates.

    I've just arrived and started work here, thought I would be working for the Australian division of my company and now find that I'll be working for the UK operation. Now I'll have to send money home for the properties....

    Don
     
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  6. geoffw

    geoffw Untitled

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    Reply: 1.1.1.2
    From: Geoff Whitfield


    I moved to the UK in 1988, and worked 3 years there- I would have stayed longer except for the recession.

    Even then I had a "Please explain" from the ATO as to why I should be treated as a non-resident for tax purposes. This was a while after lodging my tax return again in Australia after my return.

    The fact that I bought a house in England (I did intend to stay long term), and did not have property in Australia, was probably in my favour.

    I've been told that if I had owned a house in Australia while I was OS, I might have had trouble. Seek specialist advice.
     
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  7. Richard Hunt

    Richard Hunt Member

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    Reply: 1.1.1.2.1
    From: Richard Hunt


    Don,

    To properly determine the impact of your overseas employment on your total after-tax position (and have the opportunity to plan the best result for you), it is important to look at your position both in terms of:

    (i) tax paid on employment income; and,
    (ii) protection and deductibility of tax losses.


    TAX PAID ON EMPLOYMENT INCOME

    The tax paid on your foreign employment income is determined according to the source of the income and your residency status for tax purposes (as per UK and Australian tax legislation or the UK/AUST Double Tax Agreement [DTA] where relevant).

    Generally, the source of employment income will be where the employment is carried out (in your case the UK) and, subject to some specific exclusions, the UK may tax your income on this basis.

    Whether in the end you are a resident for tax purposes of the UK or Australia will fall to be determined by a review of the factual circumstances surrounding your move, the tax residency laws of each jurisdiction, and if relevant, the residency tie-breaker rules contained in the DTA should both countries treat you as a resident under their respective domestic jurisdictions.

    You haven’t provided any information regarding the details of the foreign employment or personal situation, so its difficult to provide you with any guidance on your particular residency issue. However, in any case such issues may be better addressed “off-line” with your professional advisors.

    Nevertheless, subject to the specific exclusions referred to earlier, and assuming that the foreign employment is > 3 months, whether you are ultimately a resident of the UK or Australia, your foreign employment income will only effectively be taxed by the UK, as there are special exemptions in the Australian tax law for foreign employment income earned by Australian residents.

    The tax you pay in the UK will depend on whether you are treated as a resident or non-resident individual. Unfortunately I’m not aware of the specific income tax scales and concessions for UK individuals, although I would not be surprised if non-residents were taxed at a slightly higher rate.


    PROTECTION AND DEDUCTIBILITY OF RENTAL LOSSES.

    I share the sentiment of those earlier in the thread that suggested that rental losses are effectively quarantined and carried forward until such time as they can be recouped against future income derived.

    Ironically however, assuming your only source of income is your foreign employment income and that your rental properties are held in your name, the extent to which your rental losses may be carried forward to future years as deductible tax losses, will depend on your residency status.

    This is because under Australian tax law the extent to which you can claim a rental loss (or any other loss for that matter) as a carried forward tax loss, is restricted to the amount of the loss “reduced by any net exempt income”.

    As a “UK resident” your net exempt income for Australian tax purposes is nil, therefore the amount of carried forward rental losses is NOT reduced, allowing you to claim a tax deduction in future years for the full extent of your rental losses.

    This can be contrasted with your position should you be an “Australian resident” for tax purposes. Due to the exemption provided for foreign employment income under Australian tax law, you will derive net exempt income equal to your foreign employment income less any expenses incurred in deriving that income and any tax you pay in the UK. This amount of net exempt income will then reduce the amount of the rental loss you may ultimately carry forward to future years.

    Moral of the story -- if you own negatively geared property and are thinking about an overseas employment, beware, think ahead and get some professional advice.

    Choose wisely grasshopper!

    Regards
    Richard

    PS Apologies to all for the lack of brevity!
     
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  8. WebBoard

    WebBoard Guest

    Reply: 1.1.1.2.1.1
    From: Dave UK


    Yep, agree with above.
    Lived in UK for 8 (long, cold!) years.
    Resident of UK for UK tax purposes.
    Non resident of Aust for Aust tax purposes. Lodge annual tax returns in Aust & claim net losses on Aust properties, carried forward indefinitely(?) until sometime in the future when I return or hopefully earlier to offset against future rental net profits.

    Cheers
    Dave-uk
     
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  9. Mike

    Mike Member

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    Reply: 1.1.1.2.1.1.1
    From: Mike .


    Hi Don,

    The Accountant I use over here is not one of the big 4. His name is Dan Foster CPA and he's a Melb boy. They are a small practice with basic office space. Firstly, they share a building with other tenants - not like the big 4 with large glitzy buildings. The building is unremarkable - so unremarkable I had trouble finding it. No big sign out front - just a security door with a buzzer and the name of the practice next to the buzzer.

    Take a rickety elevator or stairwell to the 2nd floor and you'll find it. The office appears to have two main rooms. A reception room - not glitzy. Behind that is a room which is partitioned for two or three desks - that's it. Dan is a young guy - probably early thirties but knows his stuff. I paid £50 for a 1 hour consultation to do my UK tax return and advice on filling out my Aussie tax pack. I brought the current tax pack and earlier editions as well. He even filled out a few fields in the spare copy of the form.

    Before coming to Australia I had a 1 and a half hour consultation with Ernst and Young. Cost $900. Ouch!

    For a small fee see Dan first. You can e-mail him beforehand with your situation so he is clued up with the correct info. If you still feel you need more then go and see one of the big four. But the consultation with them should be shorter as Dave should give you most of what you need.

    Website: http://www.dms-london.co.uk
    Email: dan@dms-london.co.uk
    Teleph: 020 7377 5577
    Fax: 020 7247 3589

    Address:

    Dynamic Management Solutions
    2nd Floor
    154 Bishopsgate
    London
    EC2M 4LN

    Tips:
    Nearest Underground is Liverpool station.
    Turn left when you come out on the street.
    Ring beforehand and ask which shops or businesses with signs it is next to so you can locate it quicker. The numbers are not easy to find. You will need to cross the road at Bishopsgate if coming from Liverpool station.
    At the door you will need to buzz to have the door opened.
    Before leaving ask Dan how to open the security door to get back out. Lucky for me someone was coming in otherwise I would have had to trek back up to the 2nd floor to find out.

    Regards, Mike
    <p>
    PS: I tried contacting you at tanfraser@bigpond.com but it bounced back. My e-mail address, if you want to contact me, is mdengler@onetel.net.uk
     
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  10. paull

    paull Member

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    Reply: 1.1.1.2.1.1.1.1
    From: Paul L


    Don,

    Try:

    www.accountants.org, they are an organisation of accountants around the globe.

    and this was from Ernst & Young (approx $300per hr in Sydney and approx $2000 for a tax return)

    "If you own or purchase an Australian
    rental property, and the running costs
    (including interest incurred in
    borrowing funds to make the purchase)
    exceed the rental income, then the loss
    incurred can be claimed against your
    other income disclosed in your tax
    return. This is so whether you are
    resident or non resident of Australia for
    tax purposes.
    Non-residents are not taxable in
    Australia on foreign investments, so
    any foreign real estate investments you
    make will be tax exempt in Australia."

    I agree with the above posts, where you should seek personal advice, as each person's situation is different.


    Paul
     
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  11. Owen

    Owen Member

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    Reply: 1.1.1.2.1.1.1.2
    From: Owen .


    When you enter through the door, pick up the torch and light it with the matches you got from the Goblin back at the train station. Walk forward, left, left, up the stairs and then right. You will see a door carved in ancient runes. Get out your Magick Flute and play the Song of the Wind to open the door. Ensure you dowse the torches with your Water Arrows first or you will be attacked by the Labyrinth Troll. When the door opens, you will see Dan and he will help you with your taxes. ;0)


    Owen

    "Gambling promises the poor what property performs for the rich – something for nothing"
     
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  12. henryye

    henryye Member

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    Salary Sacrifice for Train Tickets ... Dale?

    Reply: 1.1.1.2.1.2
    From: Henry Ye


    Hi Dale or anyone that know,

    Just a general taxation question. Would it attract FBT if I salary
    sacrifice for purchasing Train tickets to and from work?

    Thanks,
    Henry
     
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  13. DaleGG

    DaleGG Member

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    Salary Sacrifice for Train Tickets ... Dale?

    Reply: 1.1.1.2.1.2.1
    From: Dale Gatherum-Goss


    Hi Henry

    Yes, you can salary sacrifice your pay and include train travel, but, it will trigger FBT I am afraid.

    Sorry

    Dale
     
    Last edited by a moderator: 5th Apr, 2017