Non Resident - Rental Income - Contribution To Super

Some non residents have positive rental income and want to make a contribution to superannuation and claim a deduction to minimise their overall tax position.

Where the non resident provides a valid notice of intent to claim the deduction to the Fund and the Fund acknowledges receipt of this notice, the deduction is not more than the amount covered by the notice and the deduction does not create or increase a loss to be carried forward the taxpayer will satisfy all the required conditions to claim a deduction.

The tax act requires that if a taxpayer is engaged in any activities that results in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992), to deduct a contribution, less than 10% of the total of the following must be attributable to those activities:

● their assessable income for the income year;

● their reportable fringe benefits (RFB) total for the income year;

● the total of their reportable employer superannuation contributions (RESC) for the income year.

In regards to the maximum earning as an employee condition TR 2010/1 states at paragraph 65:

"In the application of the maximum earnings test, the relevant 'employment' activity need not be an activity in Australia. For a non-resident, the income attributable to employment outside Australia is not assessable income in Australia and so will not be counted in the maximum earnings test."

If the only Australian income is rental income then this test would be satisified.

This can be a useful strategy where the non-resident wants to minimise their overall tax position as non residents do not receive the tax free threshold.
Interesting, but a lot of non-resident property owners don't bother filing tax returns at all so they don't pay any tax. The ATO seems to have no way to detect them.
Agreed wategos it is up to the individual taxpayer. its like all these things it may not be detected until such time as the ATO does some data matching or when the property is eventually sold. The problem at that stage is you have a big problem with up to 95% penalties (75% intentional disregard + 20% uplift penalty) and interest. Whether they then decided to go with criminal prosection would be another matter. Not worth it in my opinion but it definitely happens.
Interesting, but a lot of non-resident property owners don't bother filing tax returns at all so they don't pay any tax. The ATO seems to have no way to detect them.

Which is why the Govt has retained the idea of imposing a withholding tax on all property sales where a non-resident owner is involved. They are also exploring TFN identifiers for rental agents or rental withholding applies.
Warning however - If its a SMSF the same rules may pose a problem. SMSFs cant always accept contributions if members are non-resident.
Residents cannot deduct for personal superannuation contributions where 10% or more of their assessable income is from employment, s.290-160(2) ITAA97.

However, non-resident property investors seem to have a distinct advantage.

They can have huge amounts of foreign source employment income which is not counted for the 10% test.

The loophole is that only "assessable income" from employment is counted.

Foreign source employment income of a non-resident is not assessable income, s.6-5(3) ITAA97.

Hmmmm .....