Mr Taxman
Change the way you feel about taxes.
Get informed and discover what the taxman doesn't want you to know.
Sharing it with Australia, Mr Taxman is a regular Woman’s Day columist and TV finance commentator
  • click to visit Mr Taxman on Twitter
  • click to visit Mr Taxman on FaceBook
  • rss

Buying property as non-resident

Dec 23, 2012

Reader question: I will be moving overseas soon and will require long term income from an investment in Australia. I was thinking of purchasing property and having the rent as a source of income, but after careful reading on the ATO website it seems I would be deemed a non-resident of Australia for tax purposes, therefore rental income would be taxed highly and I cannot claim any deductions etc to offset this. The tax would eat into too much of the rental income. My question: is there a better way to do this, for example purchasing property under a trust or company name based in Australia. Will this enable me to claim tax deductions and the tax free threshold etc and be declared as a resident for tax purposes?

If you were to purchase an investment property in Australia then it might be a good idea to purchase it in your own name.  Whilst you pay slightly more in tax as an individual, you do not have any of the establishment and ongoing running costs associated with operating a company.  Non-residents for Australian tax purposes only need to declare income derived in Australia that has not had any non-resident withholding tax deducted.  Non-residents can claim the usual deductions that are allowable for rental properties such as depreciation, rates, strata levies, repairs and interest on loans.  

In 2012-13, the first $80,000 earnt by non-residents is taxed at 32.5 per cent which is slightly higher than the company tax rate of 30 per cent.   But don’t get fooled with the headline rate.  Let’s say for example your property derives $15,000 gross rent for the year and has $5,000 of outgoings resulting in a net profit for tax of $10,000.  Whilst you would be paying $250 extra (2.5 per cent) if the property was in your own name, you would save thousands in accounting and establishment fees by not having it owned within a company or trust structure. 

If, by chance, you make a taxable loss you unfortunately miss out on the benefits of negative gearing as you wouldn’t have any other Australian income to offset it against.  There is not much that you can do about that except to carry forward your tax losses which you could one day offset against future net income.  Companies and trusts are very similar to non-residents in that they do not have any tax-free thresholds either and must also carry forward any tax losses.

This article first appeared in the July 2012 issue of Your Investment Property Magazine www.yourinvestmentpropertymag.com.au. Copyright Key Media Pty Ltd 2012.

Comments

"Hi If rental property losses have been made while overseas as a non-resident, can these be offset against Australian ordinary income (eg. salary) in the year the non-resident fully moves to Australia and has to begin declaring all worldwide income?"

By: Calib on Oct 21, 2014 7:30AM

"I bought a property to live 1 year ago and have been living in it. But I will be moving overseas for a few years. I want to rent it now. I,m a permanent resident of Australia and my rest of family are australian citizens. I,m a Sri Lankan citizen and thats where we will be living next few years. My wife and family will be on dpendent Visa in Sri Lanka. How will my rental incme be taxed? "

By: arya ratnayake on Nov 02, 2014 6:42AM

Post a New Comment

Media Availability

Are you interested in booking Mr Taxman for a speaking engagement or requesting his viewpoints for an article?

comments-rhsLatest Comments

  • "Unfortunately Natalie you are doubling up the extra tax taken out each fortnight with the year end assessment notice. Only the amount shown in the assessment is actually offset against your HELP..."

    By: Mr Taxman at Apr 24, 2017 11:45AM

    Post: Two important dates for those with HECS/HELP debts

  • "If you are under the repayment threshold each year then no repayment. Note that in last year's Federal Budget that the governmet intends on asking for repayment of HECS/HELP debts for non-residents..."

    By: Mr Taxman at Apr 24, 2017 11:43AM

    Post: Two important dates for those with HECS/HELP debts

  • "I have a HECS debt from 1998 that I have never repaid as I moved to UK in 2000 and unexpectedly stayed! Will this debt ever need to be repaid if I continue living in UK? If I return to Oz to..."

    By: Steve at Apr 23, 2017 8:26AM

    Post: Two important dates for those with HECS/HELP debts

  • "Hi Mr Taxman, I have been looking into my HECS debt because I feel that I should have paid it off by now. In 2011 the debt was at $21 399. I started working full time in 2013 and have been paying..."

    By: Natalie at Apr 20, 2017 9:06AM

    Post: Two important dates for those with HECS/HELP debts

  • "I suggest that you find a way to get the figures as any share of negative gearing losses you could claim in future tax returns once you start earning an income again. "

    By: Mr Taxman at Apr 17, 2017 3:21AM

    Post: Marriage