Australian property tax and expatriate tax expert STEVE DOUGLAS explains how Aussie property owners can determine if they need to submit an Australian tax return.

Q. I’m an Australian living in Singapore and recently rented out a property I own back home, so I understand I’ll be liable for Australian tax. Will the Australian Tax Office calculate tax owed on a base income of my Australian rent earnings, or on my overseas earnings?

A. Usually when you’re genuinely living outside of Australia for an indefinite or extended period, you’re considered Non Resident in Australia for tax purposes – regardless of the fact you may be a citizen. When this occurs, the only taxable activity is usually the rental property income and any earnings from services performed in Australia. You do not need to declare your offshore earnings to the Australian Taxation Office.  

If you’re only in Singapore on a temporary assignment, you may still be classed as Resident for tax in Australia. In this instance you’d need to declare all offshore Income and you’ll receive a credit for any Foreign Tax paid on it, when the Australian tax payable is calculated. This only applies if you intend to remain overseas for the short-term, so you need to be clear on your long-term plans.

Legally, if you’re earning rental income in Australia, you’re required to lodge a tax return each year to declare income earned and detail any expenses relating to the property – such as interest, agent fees, maintenance, rates and even travel expenses for inspection. Usually once all expenses are deducted there’s a shortfall. This shortfall can then be carried forward into future years when you return home, offsetting rental profits, capital gains on sale, or even income tax on an Australian-earned salary. You may also qualify for special building write-offs and depreciation allowances on your property, which can further enhance the tax effectiveness of your investment. Such incentives make purchasing Australian property an attractive proposition and it shouldn’t be underestimated as a powerful financial planning option.

If you choose to lodge your tax return yourself, the due date is October 31 of each year. If a Registered Tax Agent, such as ATS, prepares it on your behalf, you’ll usually enjoy an extension for submission until April of the following year. Make sure you do lodge your Australian tax return each year. The penalty for not doing so is A$550 per year per person and you may lose out on the tax benefits you’re rightfully entitled to.