Uk rental and Australian tax return. Advice please

[TheHarrisonFamily]

Hi

We have been here 21 months now. We rent out our UK and live in rented accomodation in Oz.

 

When we did our tax return last year, we declared our UK rental. Despite the majority of the UK rental income being paid straight out on the mortgage( 66% repayment, 33% endowement), the Australian tax agent told us that this year we would have a MASSIVE Australian tax bill, as all the UK rental is considered as income. We make very little on the property after paying mortgage, agent fees, insurance and maintenence. The money doesnt even leave the UK. The agent pays it into our UK account and the mortgage plus all other out goings come out of that account.

 

We havent even filed our Oz tax return yet as we as so worried about the tax bill! I know it has to be done by end October so time is at an end!

 

Is he correct or should we use a different tax agent. We really cant afford a huge tax bill. I havent seen anyone else saying this. Surely if this was the case, no one would be able to afford to rent out their UK house.

 

Any advise would be appreciated. Or any recommendations of tax agents as I wasnt over keen on the one we used last year ( probably cos I didnt like what he told us).

 

Thanks in advance

[Diane]

I think from reading other threads that the problem may be with the type of mortgage you have (i.e. the repayment bit of it) - so might be worth looking at changing your mortgage to an interest only one if that's possible - but I'm only guessing!!.... there are a couple of people who post on here who are financial advisors so probably worth starting with one of them first (one that springs to mind who is always very generous with his posts and advice on here is Andrew Williams http://www.pomsinadelaide.com/forum/member.php?u=2163 but there are others too)

[noworriesmate]

Hi

We have been here 21 months now. We rent out our UK and live in rented accomodation in Oz.

 

When we did our tax return last year, we declared our UK rental. Despite the majority of the UK rental income being paid straight out on the mortgage( 66% repayment, 33% endowement), the Australian tax agent told us that this year we would have a MASSIVE Australian tax bill, as all the UK rental is considered as income. We make very little on the property after paying mortgage, agent fees, insurance and maintenence. The money doesnt even leave the UK. The agent pays it into our UK account and the mortgage plus all other out goings come out of that account.

 

We havent even filed our Oz tax return yet as we as so worried about the tax bill! I know it has to be done by end October so time is at an end!

 

Is he correct or should we use a different tax agent. We really cant afford a huge tax bill. I havent seen anyone else saying this. Surely if this was the case, no one would be able to afford to rent out their UK house.

 

Any advise would be appreciated. Or any recommendations of tax agents as I wasnt over keen on the one we used last year ( probably cos I didnt like what he told us).

 

Thanks in advance

 

You should be fine if you can get your lender to issue you with a statement of interest which will separate the actual amount paid in interest opposed to what has been used to repay the loan. You will be due to pay tax on the capital repayment side of things but from what you have said this may not be too much. If you need more help maybe chat to Alan Collett of Go Matilda - he is a registered accountant in both Aus and the Uk and he sorts out both my tax returns which include UK rental property.

 

NWM