Announcements
Looking for information on the JobKeeper extension? Watch the video in our latest news article.

ATO Community

Moving abroad - rental income in Australia

Highlighted

Newbie

Views 1262

Replies 4

I will be moving abroad shortly for work and I will cease to be an Australian resident for tax purposes. My salary abroad will be $180,000 per year and I intend to keep my home in Australia and rent it out for $25,000 net per year while I'm gone.

From my understanding, I'll have to file a tax return in Australia and pay taxes on the $25,000 net income earned from my property. However, I'm not sure what tax rate will apply. According to the ATO website, foreign residents are taxed at 32.5% for taxable incomes of up to $80,000. The tax rate then gradually increases up to 45% for incomes above $180,000.

The question is: Will my salary abroad be included when determining the tax rate that applies to the rental income? If it is, my rental income will be taxed at a rate of 45%. If it's not, then a tax rate of 32.5% will apply.
1 ACCEPTED SOLUTION

Accepted Solutions
Highlighted

Most helpful response

ATO Certified Response

Community Support

Replies 1

Hi @Makai,

 

Thanks for your question!

 

In addition to the information provided by @macfanboy, if you remain an Australian resident for tax purposes while you are overseas, then you must lodge an Australian tax return and declare all of your foreign employment income, including any exempt income. You must declare that income even if tax was taken out in the country where you earned it, but you may be eligible to claim a foreign income tax offset.

 

If your residency status changes while you are overseas, then this may change the tax implications.

 

If you are a foreign resident for tax purposes when you leave (or become one afterwards), then you may not have to report your foreign source income in your tax return. Your tax rate will be based on your Australian sourced income only.

 

However, if you have a HELP or TSL debt, then you still need to report that as part of your worldwide income, and your HELP component will be calculated based on your total earnings.

 

Hope this helps,

 

Rachael B.

4 REPLIES 4
Highlighted

Taxicorn

Replies 3

Are you leaving permanently?

 

How long do you anticipate that you will be gone for?

 

As a foreign resident, you have no tax-free threshold and do not pay the Medicare levy.
 
You must still declare any income derived in Australia, including any capital gains
on taxable Australian property in your Australian tax return
Highlighted

Newbie

Replies 2

Thanks for your reply. I will be gone for at least 2 years. I'm fully aware that there is no tax free threshold and no medicare levy for non residents.

However, the core of my question is: Will the ATO set my tax rate solely based on the rental income generated in Australia or will they set the rate based on my worldwide income, even when I'm not a resident? Depending on which it is, my rental income in Australia will either be taxed at 32.5% or at 45%
Highlighted

Most helpful response

ATO Certified Response

Community Support

Replies 1

Hi @Makai,

 

Thanks for your question!

 

In addition to the information provided by @macfanboy, if you remain an Australian resident for tax purposes while you are overseas, then you must lodge an Australian tax return and declare all of your foreign employment income, including any exempt income. You must declare that income even if tax was taken out in the country where you earned it, but you may be eligible to claim a foreign income tax offset.

 

If your residency status changes while you are overseas, then this may change the tax implications.

 

If you are a foreign resident for tax purposes when you leave (or become one afterwards), then you may not have to report your foreign source income in your tax return. Your tax rate will be based on your Australian sourced income only.

 

However, if you have a HELP or TSL debt, then you still need to report that as part of your worldwide income, and your HELP component will be calculated based on your total earnings.

 

Hope this helps,

 

Rachael B.

Highlighted

Newbie

Replies 0

Hi @RachaelB 

 

Thanks for your helpful reply. I expect to be a foreign resident for tax purposes and I don't have any debt whatsoever, so my tax rate should be based on my Australian income only.

 

Thanks,

Makai