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Tax Benefits
Non residents are able to claim exactly the same tax benefits as a resident of Australia.
The only real difference is that they can’t actually cash the claims in until they either relocate here or sell the property.
A general guide is that most properties ( must be new to claim the bulk of the benefits) that have a 70% mortgage on them will have approx $15,000 to $25,000 a year tax benefits.
Now this is a substantial amount if one is to move to Australia and say they have had their property for 3 years then the annual tax credit will be able to be deducted from their first year’s income
EXAMPLE
Yvonne and Dwight Thomas bough an investment property in 2005
Purchase price was $ 278,000
25% deposit was $ 69,500
Plus acquisition fees of $ 12,000
The shortfall on the property was per annum $5,250
Their rental income was $ 13,000
The costs of the property :
Mortgage $ 16,680
Rates $ 1,800
Insurance $ 650
Management fee $ 728
------------------
Total $ 19,858
Less Income $ 13,000
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Annual shortfall $ 6,858
Below are the claims that can be lodged annually for tax
CLAIMS THAT CAN BE MADE FOR TAX
Any shortfall $ 6,858
Depreciation on constructions $ 5,100
Depreciation on fixtures & Fittings $ 3,700
Portion of Acquisition costs $ 1,400
Inspection reimbursements $ 1,500
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TOTAL CLAIMS ANNUALLY $18,558
MOVE TO AUSTRALIA 2009
TAX CLAIMS FOR 4 YEARS 74,232
DWIGHT WORKS IN LOGISITICS AND HAS AN INCOME IN AUSTRALIA OF $ 75,000
Tax on $ 75,000 ( without owning an investment property ) $ 17,524
WITH INVESTMENT PROPERTY DEDUCT THE TAX CLAIMS
YEAR 1 INCOME $ 75,000
DEDUCT $ 74,232
BALANCE $ 768
TAX NOW $104 FOR THE FIRST YEAR
SO ON THEIR FIRST YEAR IN AUSTRALIA THEY SAVED $17,524 by having the sense to invest in an Income producing asset BEFORE THEY RELOCATED.
That goes a long way on arrival into a new country.
For the investors that are NOT INTENDING TO MOVE THESE TAX CREDITS WILL BE ABLE TO BE ACCRUED UNTIL THE YEAR THEY SELL THE PROPERTY
STEPS TO TAKE:
As a Property owner with rental income being received, in Australia you will need to apply for a Tax file number and that can be done through an Accountant here or when you are in the country you can go into a tax office and take the copy of your contract with you.
You must lodge an annual return EVERY YEAR so that mean that if you are not intending to come to Australia in the first year of rental income you will need to use a tax accountant to apply for the tax file number.
Once you have a tax file number then you need to lodge a return every year. Cost for applying for tax file number is around the $300 per application, once only amount.
To lodge an annual return is approx $350 per person on the contract and it is tax deductable.
We recommend UPA as a group who will take care of this for you and they are very thorough with an understanding of the tax treaty between Australia and South Africa as well.
To apply for tax file number and or lodge any tax returns contact by email: Joel_buzolic@upa.com.au
Just advise Joel that you are a client of PR Australian Properties as then he is aware of what your needs will be.
Their web page is www.upa.com.au
Remember the Government is going to owe you money so best to get it recorded.
So for those that have had their propertie/s for several years and have still NOT applied for tax file number or lodged annual returns DO SO NOW. The tax department does do spot checks on off shore residents so don’t put yourself at risk of being fined for failure to lodge.
IF YOU have had income in a property for 4 years then you will need to back date and lodge 4 years worth of returns so do not let this go on any longer will you?
IT IS A LAW THAT IF YOU EARN INCOME IN AUSTRALIA YOU MUST LODGE A TAX RETURN
As I always explain, the law does not say if you earn profit, it is if you earn income.
If you have funds in a bank account in Australia and do not provide that bank with a tax file number then 10% withholding tax will occur on any interest earned. Once you do have a tax file number lodged any withheld tax will be refunded.
For further information you can contact Jenese Malone. I am unable to give tax advice as I am not licensed to do so but can put you in the right direction.
Phone + 61 755 774872
Fax + 61 755 772574
Please feel free to contact me on email: Jenese Malone
See detailed article on house shortages in Australia here...
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