Tax deduction question for overseas buyers..

I was wondering;

If you're an Australian citizen residing overseas and take out an investment property loan in Australia (say, CBA) for the purpose of an investment property in Australia, can you rollover those interest payments as a tax deduction against your taxable income upon returning to Australia?

Please let me know if I need to provide more information?

Thanks.

 

I could be wrong but I thought expenses can only be claimed in the year incurred. Even if back claiming, they amend those year returns.

I think it also makes a difference if you are a resident for tax purposes or not.

 

You will claim any expenses against your australian income - which may include overseas income in some cases. If the net income is negative then this is carried forward to the next financial year and can be used to offset income in that year.

 

are you a resident for tax purposes or a non resident ?

 

I'm not a resident for tax purposes as I get paid in the local currency.

I thought I would be able to offset my interest payments as it's for an investment property loan. I know I'm not a resident for tax purposes but surely I can carry it forward to the next financial year upon returning?

 

1. Just being overseas does not make you a non-resident.

See ATO tax ruling IT 2650.

You MUST establish the correct status. One factor to consider is whether you have abandoned your Australian home for the time being.

2. Non-residents with rental properties in Australia.

Lodge an Australian income tax return and deduct interest, rates, depreciation etc. from your Australian rental income.

Any excess rental property deductions is a tax loss. This means no tax payable this year, however the loss is carried forward to be applied as a deduction in the future.

Next year, if you are still a non-resident with only an Australian negatively geared rental property then tax losses will keep accumulating.

If you later become a resident then you still need sufficient other assessable income to be able to deduct your prior year tax losses from.

3. If you also have Australian investments earning dividends or interest while a non-resident.

If the dividends or interest have been subject to foreign withholding tax (e.g. you gave the company or bank an overseas address) then you may be receiving exempt income.

Exempt income will reduce your tax losses each year.

 

The online residency calculators (there are two !!...One inbound and other is outbound) provided by ATO are very good and will assist you PROVIDED you carefully and slowly answer each question after reading all the information and terminology. ie beware of the emigration question...Read it carefully.

Getting on a plane does not make someone non-resident. Time, intention and other factors all will affect this. eg : Moving to London for two years may not change tax residency if you are there on the wrong type of visa.

 

Thanks Rob - great information there.

Did you find this on the ATO website or have you been through this before?

 

Thanks Paul. I'll have a look!

 

I'm a resident for tax purposes here in Asia.

At the moment, I'm a non-resident for tax purposes in Australia as my address on their system is an overseas address.

 

See above. Just because the ATO have an overseas address doesn't mean you are a non resident for tax purposes.

 

having an overseas address doesn't mean you are a non resident for tax purposes. The ATO looks at a number of factors. The first question to determine is whether you have 'emigrated' to asia. Do you have a visa that allows you to live there more than temporarily ? Have you entered into a long term lease on property there ? What sort of contract are you on with your employer ? do you retain a property in australia other than your investment property ? Have you taken steps to ensure that you can permanently reside in Asia. Do you plan on coming back to Australia ? Just questions that need to be answered but many more to consider.

 

Here is a link to the two residency calculator tools....As I explained earlier carefully read ALL questions and hyperlinks before answering any question. At the end it generates a report and a opinion on residency. Print to PDF and keep.

Are you a resident | Australian Taxation Office

https://www.ato.gov.au/calculators-and-tools/Are-you-a-resident/

I have entered both a copy paste and a link here

 

wonder why the links are missing...does PC remove links...if so that isn't particularly helpful when referring other sites.