Tax implications for expat property investors

Despite living overseas, many Australian expatriates still regard property investment in their homeland as an attractive option.

But what tax implications does this pose?

The tax implications of property investment can differ between Australian expatriates and those residents living in Australia

Whether an individual is a tax resident under Australian law is dependent on a variety of factors and is unique to each case.

Subsequently, Australian expatriates, or expats as they are more commonly referred to, should seek the professional opinion of an accountant or lawyer who specialises in this area.

However, all income earned in Australia, including property rental income, is subject to tax in Australia.

In the instance where an individual is not an Australian tax resident, but they receive a rental income from an Australian-based property, they are required to prepare and lodge an Australian income tax return.

The non-resident tax rate stands at 33% for all income up to $80,000.

This increases to 37% for income between $80,001 and $180,000 and 47% for income over $180,000.

Those individuals considered residents greatly benefit because they enjoy a much lower tax rate for the lower tax brackets.

For residents, tax rates start at 0% for income up to $19,400.

This increases to 19% for income earned between $19,401 and $37,000 and 33% for income between $37,001 and $80,000.

The rate of taxation after this is the same as a non-resident.

What’s important to note is that residents and non-residents can claim a tax loss if their tax deductible expenses are greater than their Australian taxable income.

Residents can claim the loss against their other income.

If you are a non-resident for tax purposes you can carry the loss forward to offset against future income.

A wise strategy for an Australian who is moving overseas to work is to accumulate tax losses on Australian property, which can then be offset from their income when they return to work in Australia.

This can include any capital gains that are made when the property is sold.

This can be highly beneficial in instances where non-cash tax deductions, including depreciation, are a part of the tax loss.