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Posted Sun, 15 Dec 2024 03:53:59 GMT by poltax
I am doing some forward planning as I intend to become an Australian resident for tax purposes, and I have a few questions as to how I will pay tax on my rental income. 1. The Australia Tax Office advised that under the Double Taxation Agreement, I should only pay tax on UK rental income in Australia. However my understanding is that I pay tax on this income in the UK first, then get a tax credit against any additional tax paid on this income in Australia. Is that correct? 2. Assuming the above is correct, am I also correct in saying that the UK calculation will only consider my UK income. E.g. if I my sole UK income is from rental property, and that income is £12,000 after allowable expenses, I would owe £0 tax in the UK, as I am under the personal allowance? And that this would be true even if I earned £50,000 from employment in Australia? 3. Am I correct that the UK calculation will be based solely on UK rules (around deductions, tax rate etc), and that the different rules for this type of income in Australia have no bearing on the UK calculation? 4. When performing the UK calculation I understand I can deduct 20% of the total mortgage interest paid against my final tax bill. Is this correct, or do I deduct the this from the total taxable income? 5. If I am non-resident in the UK for tax purposes, does the 20% mortgage interest deduction still apply? 6. Are there any changes to the UK calculation I need to be aware of on account of being a non-resident? Many thanks for your help.
Posted Wed, 18 Dec 2024 12:28:36 GMT by HMRC Admin 17 Response

Hi ,
 
Thanks for your question.

As per Article 6 (1) of the Australia/UK Double Taxation Agreement, income from property in the UK may be taxed
in the Contracting State in which the property is situated.

You are correct, income from property within the UK would be disclosed within the SA105 UK Property page,
then you would claim back tax credit from the Australian authorities for the difference in tax deducted.

If income from property in the UK does fall below the personal allowance, then no income tax should be deducted, however, personal allowances and any deductions must also be taken into consideration.

You would declare Australian employment income within the SA106 Foreign page, which would be included within your overall calculation.

When declaring the mortgage interest figure, you would place this through as a residential finance cost, not an expense.

You may be required to state whether you are eligible to claim the UK personal allowance within the SA109 Residence page,

again however, I would be unable to definitively advise on your personal situation as other factors may need to be considered.

Thank you .
Posted Wed, 18 Dec 2024 13:56:32 GMT by poltax
WarningThis post is currently being moderated and will be visible when it has been approved by a HMRC moderator.
Posted Wed, 18 Dec 2024 14:44:09 GMT by Clive Smaldon
WarningThis post is currently being moderated and will be visible when it has been approved by a HMRC moderator.

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