It is a common misconception that if you are not making any profit on your Australian property that you do not need to lodge an income tax return. This is not correct.
It is a legal requirement that you must lodge an Australian Income Tax Return every year that you receive any taxable Australian income.
In addition, unlike Australian residents that can earn small amounts of annual income and still remain tax free, when living out of Australia there is no tax free allowance on your income, so you become taxable on your first dollar of net taxable income. The Australian financial year ends on the 30th June each year.
If you chose to prepare the return yourself then you must lodge by the 31st October each year. If you have a Registered Tax Agent, such as ATS, prepare your return then we have time extensions that allow lodgement through to April the following year.
Failure to lodge your return by the due date can lead to penalties of up to A$550 per year, per person even when there may be no tax payable.
You should not be concerned about the need to lodge an Income Tax Return, it is a simple process and can actually prove to your benefit in most circumstances.
For most people, the only taxable Australian income is likely to be the collection of any Australian property rental during the year, regardless of whether the rent is greater than the expenses or not. In fact if the expenses on the property are greater than the income, the resultant loss needs to be calculated and lodged as it carries forward indefinitely to offset any future rental or other Australian income and capital gains.
This is a substantial planning benefit and greatly to your personal advantage to ensure you lodge correctly and record this each year.
It is very easy to use a sensible level of borrowing against your Australian property to ensure that a no income tax environment can be achieved.
In addition it may include Australian wages or consulting fees that were earned for services provided in Australia. If you receive income from an Australian company while living overseas, and the income relates to services provided out of Australia, then that would not be taxable in Australia.
If you have earned any Australian bank interest that is not a taxable income, instead the bank should be deducting a Withholding Tax of 10% from your interest and then there is no further tax obligation or need to report in Australia.
Similarly with Dividends from Australian companies, if you receive “Unfranked” dividends then a Withholding Tax would apply and no further obligation. If you have received “Fully Franked” dividends (where the company has paid tax prior to the dividend being paid) then no further tax obligation exists and no Withholding Tax is required to be levied. Share in Australian Public companies are also Capital Gains Tax Free for Non-Residents.
Australian tax laws are very complicated but they are also quite fair and reasonable for people living overseas. It is just important to be aware of your obligation to lodge, ensure that you have good guidance on your personal situation and seek professional support to ensure that your tax obligations are kept to reasonable levels.
