Tax help please :)

[mrmonopoly]

Hi All,

Just a quick hopefully simple tax question re negative gearing.

Basically I am planning on taking a one year career break from August in which I will be doing a combination of travelling and working abroad. The work abroad will be in the UK and only be for 6 or so months.

As the majority of my income for that financial year will have been made in the UK, will it still be possible to claim negative gearing on my investments back in Australia at the end of financial year 2011/2012 inclusive of the income I will have earned over in the UK?

Similar topic but different question. Should my investment expenses be greater than my total income for that financial year am I able to carry over the losses into the next financial year? Just asking as I may decide not to work and just volunteer.

Last but not least, does anybody know of a really good property savvy accountant in Sydney? I'm happy to travel, but I insist they are property investors themselves so we are at least on the same wave length. My current accountant seems to have a hatred for property for some bizarre reason.

Thanks again guys and gals really appreciate your continued help

Mr M

 

[BV]

Mr M
I'm not an accountant but from what I know you cannot claim negative gearing against foreign income, but you can carry forward the losses.

Here is the ATO page
http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/64144.htm&page=4&H4

You'll probably find eddie's post #113 useful
http://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4326054

Regarding accountants, I use these guys
http://www.valsamisandassociates.com.au/contact.htm

 

[cannonloose]

What BV said is correct - had the same situation happen for me, had an IP, and an unexpected request to go o/s for a few years. Back now and able to apply those losses towards my current income.

 

[Terryw]

And, don't forget you may have to declare this on your foreign income tax return too.

 

[Rob G.]

I am assuming you are a resident for Australian tax purposes.

You will likely remain a tax resident while overseas, so you can negative gear here.

Your UK source income will likely be counted in your Australian tax return and a foreign tax offset will be allowed for the UK tax paid.

However, if your negative geared property generates significant losses then some your foreign tax offsets will be wasted because they are limted to your Australian tax otherwise payable, are not refundable and neither can they be carried forward.

Cheers,

Rob

 

[mrmonopoly]

Thanks all really appreciate the info.

 

[Mal P]

Hi folks,

Sorry for digging up this old thread, but I'm in the exact same situation Rob G mentioned above - I've been in the UK for two years but have to pay Australian tax as I am still a resident for taxation purposes.

The thing is, my UK tax exceeds what Australian tax I would have paid (which is fine so I use the UK tax as an offset) but then I have my rental income in Australia which I need to declare and then huge negative gearing losses - can I carry those losses forward or do it lose them?

Does anyone know an accountant who understands foreign income taxation rules AND combining negative gearing rules?

Many thanks
Mal

 

[Rob G.]

A couple of facts you wrote seem a bit concerning.

You need to talk to a tax accountant or lawyer who specialises in both UK & Aus tax. You should be able to locate one in the UK if more convenient.

The reason is that the UK double tax agreement with Australia may displace the normal Australian rules and deem you a non-resident here. Though your rate of tax may fall in the UK

If a non-resident with only Aus source rental income, there is nothing to negative gear against so losses will be carried.

Also, there may be caps on debt deductions which may limit the losses.

If a resident ... another concern is that you say your 'UK tax exceeds your Aus tax'. Do you mean 'total tax' or the 'rate of tax' on your UK sourced income exceeds the Aus rate ?

There is a cap on the amount of foreign income tax offset, limited to the amount of tax that would have been paid here, the excess is lost.

Specific advice should be sought, this is a messy area.

Cheers,

Rob

 

[Mal P]

Hi Rob,

Yes indeed, I need to talk to an accountant who know all about this - would you know of any?

I would still be classed as an Australian resident for taxation purposes, as I was away for less than 2 years AND I was only on a working holiday visa, fully intending to return to Australia.

So the amount of actual UK tax I paid last financial year, once converted to dollars, exceeded the amount of Australian tax I would have paid had I earned the same salary (converted to dollars) in Australia.

So my foreign off-set will definitely be capped at the amount of Australian tax I would have paid had I worked in Australia. But my question then is, what about my negative gearing losses? If all of the Australian tax I would have paid on my UK income has been off-set AND my Australian rental income has been more than off-set by my rental expenses therefore with a corresponding loss, can I carry that loss over to the next financial year?

Thank you,
Mal