Do I have to pay tax on rental income?

Question

Julia

I am an Australian citizen. I have been resident in London, UK for 5 1/2 years and will obtain dual-citizenship early next year (British/ Australian). I want to buy an investment property (two bed flat) in Queensland to rent out. It is $435k (desposite of $100k – $120k) and I am hoping to rent it for $450-$500 per week.

I have no other investments in Australia. Can you tell me whether I am ‘resident’ and whether I need to pay tax on the rental income.

If I am a resident and need to pay rental tax, is there any way I can change this status?

What is the estimate of the range that I should put aside to pay conveyancing fees in Aus?

Thanks
Lizzie

Answer

Lizzie,


You would be considered a non resident of Australia for tax purpose but as you earn income from a property in Australia, Australia has a right to tax that income. You will be taxed as a non resident which will generally mean 29 cents in the dollar on your net income, with no tax free threshold. You are of course allowed all the normal rental property deductions.
Because you do not have employer superannuation support in Australia you are entitled to claim a tax deduction for your superannuation contributions, up to $25,000 if you are under 50 years of age or $50,000 if 50 and over. As the superannuation contribution will only be taxed at 15% this maybe a viable alternative. The only problem is, if you haven’t already got an Australian superannuation fund, you may not be able to open one here while you are overseas.
There is a booklet in our Freebies section called overseas which has a lot of articles that should interest you if you want to know more about non residency.

Sorry I cannot quote you on conveyancing costs

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