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Re: Overseas property rental income

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Newbie

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Hi, I am trying to understand the declaration of overseas property rental income in Australia tax. I have an apartment in overseas which is still under mortgage and currently renting out. The rental income is used to pay off the mortgage. My question is how can i declare this as net income (rental less mortgage) in such that i am not gaining any income because all are being paid for mortgage. The apartment is not purchase for investment, it is for my own occupancy before i came to Australia. Of course i am declaring this rental income to the overseas country where my apartment is located. 

Appreciate if you can advice me on this matter. Thank you.

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ATO Certified

Devotee

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Hi @plihfen,

 

Welcome to ATO Community! If you’re an Australian resident for tax purposes and received income from overseas, you’ll need to declare this income on your Australian tax return, even if tax was taken out in the foreign country. This includes rental income from overseas properties and any other foreign sourced income in your tax return. If you’re using your property to earn income, you may be entitled to claim deductions for costs you’ve had to pay to rent it out – check out our guide to rental properties over on our website. 

 

If you’ve already paid tax on your overseas income, you may also be able to claim a foreign income tax offset in your Australian tax return.

 

Thanks!

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Taxicorn

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Declare your rental income as rental income and then claim any expenses that you incur with respect to this rental property eg loan interest, rates, property management fess etc.

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Best answer

ATO Certified

Devotee

Replies 2

Hi @plihfen,

 

Welcome to ATO Community! If you’re an Australian resident for tax purposes and received income from overseas, you’ll need to declare this income on your Australian tax return, even if tax was taken out in the foreign country. This includes rental income from overseas properties and any other foreign sourced income in your tax return. If you’re using your property to earn income, you may be entitled to claim deductions for costs you’ve had to pay to rent it out – check out our guide to rental properties over on our website. 

 

If you’ve already paid tax on your overseas income, you may also be able to claim a foreign income tax offset in your Australian tax return.

 

Thanks!

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I'm new

Replies 1

Hi, in response to your reply, I had the same question, could you please clarify the below:

 

 Based on the information here: https://www.ato.gov.au/Individuals/Tax-Return/2019/Supplementary-tax-return/Income-questions-13-24/2...

Part C: Did you receive any foreign rental income?

 

Its clear that,

a. we need to Add all rental income + Tax paid in the foreign country

b. Add up all the deductible expenses that you incurred in earning your foreign rental income, excluding any debt deductions

 


It also says the below: "Debt deductions, such as interest and borrowing costs, are not deductible for the purposes of this calculation unless they are related to income earned through a permanent establishment in an overseas country. If you incurred debt deductions in earning your foreign rental income and the deductions are not attributable to an overseas permanent establishment, see question D15 Other deductions – not claimable at items D1 to D14 or elsewhere on your tax return 2019."

 

This is totally confusing to me now, as to where to show or declare the tax deductions for the interest paid on Mortagage/ Home loan.

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Taxicorn

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@vramsy 

 

If income is derived by an Australian resident from a rental property that is located overseas and interest on a mortgage is paid to a foreign lender there are withholding obligations that may have to be addressed.

 

Generally, for the interest expense to be tax deductible the taxpayer must register as a PAYG withholding remitter and remit to the ATO 10% of the interest paid to the non-resident lender. There are some exceptions to this withholding requirement.

 

Any deductible foreign interest and associated fees are a debt deduction and claimed at Item D15 (not Item 20).