Australian property tax and expatriate tax expert STEVE DOUGLAS explains the grounds under which you can recover airfares back to Australia.

A Yes, you can claim the cost of travelling to Australia against your tax provided you’re collecting rental on an Australian property. And to justify your claim, part of your trip must be spent inspecting the property.

Australian property tax and expatriate tax expert STEVE DOUGLAS gives guidelines to differentiate an Aussie non-resident from a resident for tax purposes.

Q My family lives in Australia while I work overseas. Does this mean I’ll be taxed in Australia?

A In the 2009 Australian Federal Budget, the Rudd Government announced rule changes for Australians working abroad – if they are residents for tax purposes. If you’re genuinely living overseas these changes don’t apply to you and tax is not payable in Australia on offshore income, as long as you establish non-resident status.
     If one spouse lives overseas and the other in Australia, this can cause confusion when establishing your tax position. Living apart doesn’t affect your tax status, but it does mean closer scrutiny to ensure you’re actually living overseas, rather than working abroad.
     Consider the following to determine whether you’re a non-resident or resident for tax purposes:

Situation          
Non-resident outcome   

Australian property tax and expatriate tax expert STEVE DOUGLAS advises on
the tax implications of moving back into a property you previously rented to a
third party.

Q I’ve been renting out my house in Australia but plan to move back in shortly. Can I claim any maintenance expenses before that?

A When you rent out a property in Australia, all expenses incurred in keeping it in a tenantable condition are considered an expense which can be claimed either in full as general maintenance or as a progressive depreciation claim for more substantial items such as stoves and carpets.
     If you intend to move back into the property, you can claim all expenses incurred in bringing the property back to a satisfactory condition at the end of the rental period. This includes painting, garden maintenance and general repairs. If possible, initiate all repairs before moving back into the property or within a reasonable period to claim the expenses in full.
     The length of your ownership may have a bearing on the amount you can claim. For example, if you recently acquired the property and have rented it for only six months, the total tax deduction may be reduced if it appears the property is being improved substantially from the time it was acquired rather than being maintained over the course of the short rental period. The longer the rental period, the more likely full maintenance expenses will be allowed when the rental period comes to an end.
     Expenses to improve the nature of the property – new carpets, kitchen equipment or any structural improvements – aren’t usually considered an expense but allowed as a partial annual write off if there’s rental income. So if the rental ceases so does the tax deduction entitlement, as these items will provide benefit to the owner-occupier in the future. This may allow you to claim any residual amount on old items you replaced, such as a stove. Any unclaimed depreciation will be allowed as a full write off in the year the item was replaced and could amount to a reasonable tax offset in the final year of rental depending on how old the item was. If the items were recently replaced, then only the depreciation allowance for the rental period will be allowed. But this will cease to be a deduction once the property is no longer rented. You’ll also not be able to write off any remaining value unless the item is replaced and scrapped.
     I’m often asked if it’s worth doing major repairs prior to moving in. Generally speaking the depreciation write off is not sufficient to warrant the fact that you may prefer to be the first user of the item rather than the tenant. If you have substantial expenses to be incurred during the changeover it’s wise to seek professional advice on the various expenses to determine the tax deduction available to you, prior to the expense being incurred.

1. Australian taxation benefits Don’t underestimate the value of receiving a few years of “Tax Free” salary on your return to Australia, through the build-up of tax credits on your property holding expenses.
2. Cost If you buy now you’ll know the full cost of purchase, as you’ve already made the transaction. For example, a house valued at A$500,000 today and bought today, will never cost any more. But if you delay the decision until you return the same house may have increased in value, and it’s impossible to predict the future purchase price. If you want to live in an area with good historical growth, buying today could actually save you thousands of dollars.
3. Affordability While you are overseas enjoying improved earnings and savings power you’re in a healthy financial position. And if you engage a tenant and collect rent towards repaying your mortgage, a more expensive property in a better suburb may be easily within reach.

STEVE DOUGLAS advises on the importance and relevance of lodging an Aussie income tax return.

If you are lodging your own tax return and received Australian sourced income in the year prior to June 30, you must declare the income and claim expenses by October 31 this year. If you engage a Tax Agent you’ll be granted a lodgement extension until April 2012. If you didn’t receive Australian income to June 30 2011, but lodged an Australian tax return in the past, it’s important to advise the ATO so you don’t get penalised. A fine of up to A$550 may be imposed if you do not alert the ATO.

STEVE DOUGLAS outlines the tax implications of having members of your family live in your Aussie property

Q Can I claim housing tax benefits if a family member is living in my Aussie property?
 

STEVE DOUGLAS of Australasian Taxation Services highlights some of the tax issues and changes in the recent Australian Federal Budget, which could affect expatriates, intended migrants and foreign investors.

Personal Tax Rate Unchanged For the first time in nine years, there were no reductions in Australian personal tax rates, however, from 1 July,  2013 top tier earners – those above A$180,000 – will enjoy a reduced tax rate of 40 percent. The current A$37,000 to A$180,000 income bracket will merge into a single rate of 30 percent. Non-resident taxpayers and the 15 percent rate will not incur a tax-free threshold – rather, it will be a single rate of 29 percent up to A$37,000 of taxable income. Provided you’re genuinely living abroad for extended periods, Australians will continue to enjoy tax-free offshore salaries.

STEVE DOUGLAS outlines the implications of Land Tax on Australian property. 

STEVE DOUGLAS highlights the pros and cons of an interest-only loan repayment model.

 

Q Is it wise to opt for “interest-only” repayments on my Australian property loan?