Non-residents and Australian Tax Return

I will check with a tax professional but..

Would a non-resident living overseas who owned a residential rental property that had no income (rent did not exceed expenses) have to submit an Australian Tax Return?

How would you interpret this question from the ATO website calculator.

Business and Investment Income

The following business or investment events help determine if you are required to lodge an income tax return for 2014-15:

• carried on a business
• received income from dividends or distributions exceeding $18,200 (or $416 if you were under 18 years of age at 30 June 2015) and you were entitled to a franking credit (from a dividend or a trust distribution)
• made a loss or can offset a loss that you made in a previous year against income
• were entitled to a distribution from a trust or a partnership that carried on a primary production business
• qualified as a special professional (sportsperson, artist, inventor) covered by the income averaging rules

Did any of the above business or investment events apply to you during the financial year 2014-15?

 

Yes you would need to lodge a tax return.

The losses will be carried forward and then used to offset any future positive income which is good for non resident as you are taxed from the first dollar of income.

Will also help in reducing your capital gains tax liability if it only generates losses.

 

You are looking at a question to assist resident individuals decide whether they are required to lodge a return.

Assuming you are living in the US ...

1. Determine under domestic Australian tax law whether you are a resident of Australia. If not then you are a non-resident.
2. If you are an Australian resident, then determine under US laws whether you are a resident of the US.

If yes to both then:

3. Determine your residency status under the tie breaker clause in the Australian double tax treaty with the US.

If you are a non-resident then there is no tax-free threshold and a return must be lodged disclosing your Australian rental income and claim your deductions related to earning that rent.

Each step requires specific advice.

 

Thank you. I took the ATO tax resident calculator and I am definitely a non-resident of Australia.

Here is the meat of the question. If I should submit a tax return to ATO to show rent and expenses that offset that rent, then I presume the ATO would want me to declare my personal worldwide income.

If so, would purchasing the investment property through a corporate entity make a difference.

 

No.

Only your Australian source income is relevant.

And if you have received interest or dividends from an Australian entity that has been subject to withholding tax or the dividends are franked then these amounts are exempt from further tax.

Most likely your Australian rental income and deductions will only be relevant if you have not made a capital gain on the property.

If your Australian rental deductions exceed your Australian rental income then no tax is payable and all you are doing is reporting a tax loss which gets carried forward.

In a future profits year these carried forward tax losses may be applied as deductions.

 

Brilliant. Thanks

 

As a non resident have you registered for land tax?

 

A non-resident that earns $1 or more of taxable income (ignore deductions) is obliged to prepare and lodge a income tax return.

Taxable income for a non-resident does NOT include:
- Interest if withholding tax was deducted by the payer
- Fully franking dividend income
- Unfranked dividends if withholding tax was deducted by the payer
- Capital gains other than property.

Also worthwhile to consider if your property is affected by land tax. Some states impose land tax and a reduced threshold applies to non-resident owners / absentee landlords (Different terms in each state). Land tax and Commonwealth income tax are separate.

The comments made by others re carrying forward losses can be very important and can amount to substantial benefits if you ever sell or if you return.