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Common Issues Facing Australian Residents with UK Income and Assets

Sunset in Houses Of Parliament - London

As we approach the end of another financial year, it’s a good time to talk about the common challenges encountered by Australian residents who have income and assets in the UK. With #taxplanning tips making the rounds, now is the perfect time for me to share some insights to help you navigate this complex UK/Australia tax landscape.


UK Properties

Owning properties in the UK brings certain tax obligations. Rental profits are subject to UK tax and must also be declared in Australia. Note that the foreign income tax offset can only be claimed for UK tax that has been paid. This may require preparing the UK 2022/23 tax return well in advance of the January 31, 2024 deadline. Remember, the calculation of assessable rental profits differs between the UK and Australian tax systems, so keeping detailed records will help maximise your allowable deductions. Approach your lender to obtain the full details of interest payments rather than relying on the annual interest statement which doesn’t correspond to the Australia Financial Year.

When selling UK property, you are required to file a UK Capital Gains Tax (CGT) return and pay the tax within 60 days. As a non-UK resident, you have several methods to calculate your gain, so it’s advisable to start early and gather historic information. As an Australian tax resident, the gain will also be assessable in Australia, with relief available for any UK tax paid. Be mindful of exchange gains and losses between the dates of exchange and completion, as they add another layer of complexity to the calculations. If the UK property was at any time your main residence, you may be eligible to claim some main residence exemption in Australia.

UK Pension Income

For most Australian resident individuals, #UKpensions are taxable in Australia, with no tax payable in the UK. However, not all of the pension income is necessarily taxable in Australia. Depending on your contribution history, there may be opportunities to reduce the taxable amount. The same applies to the 25% tax-free lump sum. Although this sum is taxable in Australia, deductions can be claimed based on your contribution levels. When it comes to the UK state pension, the Australian Taxation Office (ATO) recognises that 8% is not assessable. However, there may be room to negotiate a higher exempt amount if you have comprehensive historic records.

Residency

Your residency status in Australia determines the income and gains that are subject to tax here. Temporary tax residents generally don’t pay tax on income earned in another country, unless it arises from employment. Temporary tax residents are broadly defined as individuals who are not permanent residents, Australian citizens, or married to one. Understanding the interaction between the Australian and UK tax systems for Australian residents can be intricate, but with careful consideration of the facts, there are opportunities to achieve tax savings.

Navigating the complexities of Australian residency with UK income and assets requires careful planning and expert guidance. Consulting with a qualified tax professional to ensure compliance with both tax systems while optimising your tax position. At Salann we specialise in advising clients with UK/Australia tax issues and are always happy to have a conversation.
Remember, staying informed and proactive is key to managing your tax affairs effectively. If you require assistance or have any questions, or simply want to #talktax feel free to reach out. Let’s make the most of the joys of being in two tax systems!

 

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