Rental Tax for Non-resident

I'm a non resident and I have an apartment in Melbourne. I plan to rent it out but not sure, since I heard that non-resident rental income is taxed at a very high rate.

I quickly checked the ATO website the other day, non-residents income are taxed at $0.29 for every dollar received. That is almost twice more expensive than the resident's rate.

Is this true? or it is just me who's looking at the wrong number? What if I ask my property manager to transfer the rent money to overseas bank account, would I be able to escape the tax? If I decide to pay the tax, and use tax agent's service to do the tax return, would I be able to get most of the money back?

If anyone had gone through similar experience and found a way out of this problem, please let me know. And any suggestion and comments would be deeply appreciated.

thanks,

Yudi
 
I quickly checked the ATO website the other day, non-residents income are taxed at $0.29 for every dollar received. That is almost twice more expensive than the resident's rate.

Yes, we have an expensive non-resident tax rate. You pay 29% flat up to the 30% threshold, and then you pay at the same marginal rate that we do.

What if I ask my property manager to transfer the rent money to overseas bank account, would I be able to escape the tax? If I decide to pay the tax, and use tax agent's service to do the tax return, would I be able to get most of the money back?

Escaping tax is illegal.
You won't get any of that tax back.

I assume the property doesn't have a lot of tax deductions which will lead to a tax bill?

You would have to speak to your accountant about specifics that relate to your situation to reduce your tax (eg the costs of selling and buying another property to refresh debt) because on the face of it, you have a positively geared rental with very little in the way of deductions. If you plan to hold onto that specific property, you don't have a lot of options.
 
The tax you pay in Australia as a non-resident will reduce your tax liability in you country of residence, assuming they have a dual-taxation agreement with Australia.
 
Are you sure you are a non-resident for TAX purposes?

Just because you dont live in Aus does not make you a non-resident for tax purposes. You have to meet certain tests. Are you Australian? When you left Australia, was your intention to stay overseas for more than 2 years? etc etc

As an example, many people think if you get seconded overseas then you become a non-resident of Australia. THis is correct in the normal sense of the word for 'resident', but from the perspective of Australian tax - secondees to overseas on less than 2-year contracts are usually considered resident for tax purposes.

It's considered a bit of a grey area in tax, or it was a few years ago when I had to deal with it.
 
Thanks for the replies, I really appreciate it.

@jigglypuff
Please allow me to explain a bit more of my background in regard to my residency status. I'm an international student who is currently waiting for my permanent residency. I have been waiting for 2 years and there's no progress on the application. Thus, I plan to cancel my application and go back home to my country for good sometime this year.

Few years back my parents bought this apartment, and since now I've decided to go back home, we plan to lease the apartment. The apartment is under their names but all the rents will be paid to my Australian bank account.

@Mry
Thanks for the reply Mry. It's written in ATO that non-resident can lodge a tax return, and I can claim expenses relating to my rental property but only for the period my property was rented or available for rent – for example, advertised for rent.

Expenses could include advertising for tenants, bank charges, body corporate fees, borrowing expenses, council rates, decline in value of depreciating assets, gardening and lawn mowing, insurance, land tax, pest control, property agent fees or commissions, repairs and maintenance, stationery, phone, water charges, and travel undertaken to inspect the property or to collect the rent.

So does this mean that I still can get back some of the money I paid for tax? Or is there different rules of tax return for non-resident?
 
If the apartment is in their names, they will need to lodge returns in Australia for the rent received from it.
 
I

IRR

Guest
Your parents should lodge tax returns in Australia as they seem to be non-residents who have Australian income. Not lodging tax returns is illegal and can cause more problems - not really an option.

Broad options are

A. Your parents lodge Australia tax returns, maximize all legally allowable deductions (interest, depreciation, management fees, maintenance, etc.). If their country of residence has a DTAA with AUstralia, claim a deduction on the Australian tax paid in their tax returns in their country of residence. ATO site shows all countries with which Australia has DTAAs.

B. Sell the property - if it makes sense within their financial plan

C. Depending on the figures and your parents' financial situation and investment plan, buy another property in Australia so that both the properties together make a cashflow neutral (or slightly negative cashflow if that fits in their financial plan) portfolio. They will still need to lodge Australian nonresident tax returns but if they can carry forward rental property losses and in future offset them against other Australian income (e.g. capital gain if they sell in future).

Once you work out your financial plan and likelyhood of living in Australia see a good accountant who specializes in expat taxation.
 
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