Self Assessed on Rental Income Living in Oz

7

747mel

Registered User
Messages
4
Hello all,

I have a question I hope someone can help with.

Wife and myself moved to Oz.

We have two rental properties in Ireland, and have just gone through the Tax returns.

Question I have is in relation to Tax Credits. I have been informed that as we are non resident, that we may be only entitled to a portion of the Credits based on a formula Revenue use and this based on a Single person allowance, not married, See below taken from Revenue website.

Allowances / Tax Credits x Income within the charge to Irish tax / Total worldwide income.

Can anyone confirm this and would anyone know a simplified version of the formula so I could work it out.

Appreciate any feedback
 
You have been informed correctly (provided you are Irish citizens).

You should be entitled to the credits and reliefs that would be available to you if you were resident, which suggests the married credit should be available. But if the properties are held jointly then the rents should be split between you and your wife and each of you would be entitled to the personal credit (as restricted).

The formula can't really be any simpler. Maybe it's best demonstrated by example:

Tax credit = 1,650
Irish income = 10,000
Other non-Irish income (eg Australian Salary) = 30,000

entered in to the formula it looks like:

1,650 x(10,000/(10,000+30,000)=
1,650 x(10,000/40,000)=
1,650 x 0.25=
412.50 = allowable tax credit.
 
Smeharg, thanks for reply,that is good info.

Another question relating to formula, are the Incomes used in the formula Gross, or net.

As in, Irish rental Gross amount earned or the the Taxable amount after deduction of expenses like maintenance, Mortagage Interest etc.

Oz, Gross or Net.

Thanks.
 
I don't think his Oz salary has anything to do with this. (Myself and my husband do not declare our taxed non resident income on our Irish tax returns)

OP should look at the revenue.ie website, this AAM website under landlords/tenant's and the Irishlandlord website.

He might also consider hiring the services of an accountant to get it right from the start.
 
747mel said:
Smeharg, thanks for reply,that is good info.

Another question relating to formula, are the Incomes used in the formula Gross, or net.

As in, Irish rental Gross amount earned or the the Taxable amount after deduction of expenses like maintenance, Mortagage Interest etc.

Oz, Gross or Net.

Thanks.
Click to expand...
Net, gross rental receipts are merely turnover. Your income is your receipts minus your allowable deductions.

This blog post may assist you: http://mcgibney.ie/2012/12/24/irish-property-living-abroad-what-to-do-about-tax/
 
Bronte said:
I don't think his Oz salary has anything to do with this. (Myself and my husband do not declare our taxed non resident income on our Irish tax returns)

OP should look at the revenue.ie website, this AAM website under landlords/tenant's and the Irishlandlord website.

He might also consider hiring the services of an accountant to get it right from the start.
Click to expand...

It's not necessarily "declared" as taxable income.

However, if you are not tax resident you are required to state Irish income and total worldwide income for the purpose of determining the amount of Irish tax credits allowed.

It appears that OP has been advised correctly and is seeking a second opinion to confirm this.

Bronte, you may need to have a look at your past tax returns to make sure you haven't over claimed Irish tax credits.
 
Thanks you for all the feedback, much appreciated.

You are correct, it was a second opinion I was after. I have an accountant who does my returns. But just because they are accountants, deesn't mean they always get it right or that its not worth questioning things now and then. I have saved myself money over the years this way.

Regarding the tax credits for Non-residents, I have spoken to 3 differant people in revenue about it, and they either didn't know or had differant versions of what is allowed.

I have checked all the webites, and none are crystal clear on the finer details.

I will be speaking to my accountant about claiming a portion of the tax credits as I am a Non-resident for tax purposes, and I will try Revenue again to confirm If I can base this on the Married Couples allowance and not single.

Will update if I get any info.
 
smeharg said:
Bronte, you may need to have a look at your past tax returns to make sure you haven't over claimed Irish tax credits.
Click to expand...

I used to do my own tax returns for years and never had any problems and in the last few years I've a very competent accountant so I'm confident everything is fine. As 747 is realising every revenue person you talk to has a different opinion.

747mel, you cannot ever rely on anything revenue tells you. You must get it in writing from them. Based on my recent experience it is taking them 2 months to reply to email requests.
 
747mel said:
I have an accountant who does my returns. But just because they are accountants, deesn't mean they always get it right or that its not worth questioning things now and then. I have saved myself money over the years this way...I have checked all the websites, and none are crystal clear on the finer details.
Click to expand...

You are wise to query and doublecheck your accountant's advice. But, websites and other generic information sources are no good if your question is in anyway complicated or uncertain. The answer often depends on the specifics of a given situation and unless the information source is particularly nuanced, or you're just lucky, it may well mislead rather than illuminate you.

747mel said:
Regarding the tax credits for Non-residents, I have spoken to 3 differant people in revenue about it, and they either didn't know or had differant versions of what is allowed.

...and I will try Revenue again to confirm If I can base this on the Married Couples allowance and not single.
Click to expand...

To be blunt, you're wasting your time with Revenue. They are not in the business of giving advice, their role is tax collection and administration. They will disown the 'advice' given by their staff, whenever it suits them. And, as per your own experience, their 'advice' can be wildly inconsistent.


747mel said:
I will be speaking to my accountant about claiming a portion of the tax credits as I am a Non-resident for tax purposes
Click to expand...

There is no mystery here. Stuart has already told you exactly what to do.
smeharg said:
if the properties are held jointly then the rents should be split between you and your wife and each of you would be entitled to the personal credit (as restricted).

The formula can't really be any simpler. Maybe it's best demonstrated by example:

Tax credit = 1,650
Irish income = 10,000
Other non-Irish income (eg Australian Salary) = 30,000

entered in to the formula it looks like:

1,650 x(10,000/(10,000+30,000)=
1,650 x(10,000/40,000)=
1,650 x 0.25=
412.50 = allowable tax credit.
Click to expand...
 
747mel said:
...

I will try Revenue again to confirm If I can base this on the Married Couples allowance and not single.
Click to expand...

I've just found guidance on it and you can't (unless you both have Irish income).

Without getting too technical the courts have found that you cannot elect for joint assessment (which gives entitlement to the married credit) unless you are both assessable to Irish income tax.

Here's a link to more info on the Revenue web-site

[broken link removed]
 
Hi Stuart,

I don't think the issue is joint assessment per se. This is a bit of a red herring here as Revenue treats all non-resident married/civil partner spouses as single for tax admin purposes.

I still think that if both spouses are in receipt of rental income (even if from the same property), they should separately register with Revenue as non-resident landlords and include their share of the rental income on their respective tax returns, each respectively claiming tax credits if/where available.

What do you think?
 
T McGibney said:
When it suits them, Revenue will also disown information or 'advice' given in writing.
Click to expand...

If they give incorrect advice in writing then they cannot penalise or fine you if you act on that advice.

And I disagree with you that their only role is tax collection and admin. They have a duty to help taxpayers fill out their tax returns correctly.
 
Bronte said:
If they give incorrect advice in writing then they cannot penalise or fine you if you act on that advice.
Click to expand...

I wouldn't like to be depending on that particular argument in the course of a Revenue Audit, Investigation or prosecution proceedings.

Bronte said:
And I disagree with you that their only role is tax collection and admin. They have a duty to help taxpayers fill out their tax returns correctly.
Click to expand...
Their disclaimers would suggest otherwise. There is a lot more to completing a tax return than filling in the form.
 
T McGibney said:
Hi Stuart,

I don't think the issue is joint assessment per se. This is a bit of a red herring here as Revenue treats all non-resident married/civil partner spouses as single for tax admin purposes.

I still think that if both spouses are in receipt of rental income, they should separately register with Revenue as non-resident landlords and include their share of the rental income on their respective tax returns, each respectively claiming tax credits if/where available.

What do you think?
Click to expand...

I now realise which I didn't do before that this is the exact situation I'm in with my husband. When I did the tax returns we were basically running at a 'loss' and so didn't need any credits etc. But when I hired my accountant there was a problem because I'd always done the returns under my husbands name (historically it was under the husband's name etc, something like that). But it caused a problem because we couldn't get the married allowance if the return was going under one name. We considered then splitting the rents as per the accountants advice and submitting separate returns but he managed to handle instead by putting a note into the ROS system on my tax return, as he's my Tain (Tan agent, you accountants know what I mean) and this notifies revenue to 'fix' the computer and give us the correct allowance. If they forget to fix it as I understand it he phones someone up in revenue he knows and they fix it manually. I'm sorry if this sounds vague, it made perfect sense when my accountant explained it at the time and I'll have a dig back on my emails to see if I can find out how it was done. There's something wrong with the online system that has a problem with non residents and being married. They didn't think of that I think when they created ROS.
 
T McGibney said:
Hi Stuart,

I don't think the issue is joint assessment per se. This is a bit of a red herring here as Revenue treats all non-resident married/civil partner spouses as single for tax admin purposes.

I still think that if both spouses are in receipt of rental income (even if from the same property), they should separately register with Revenue as non-resident landlords and include their share of the rental income on their respective tax returns, each respectively claiming tax credits if/where available.

What do you think?
Click to expand...

Well, you need to be jointly assessed to get the married rates. Revenue treats non-residents as single because joint assessment doesn't apply unless both spouses have Irish income. But if both have Irish income then each should have a personal credit, so yes it is a bit of a red herring in that regard.

I agree re. splitting the income which is what I suggested in my initial response.
 
I've looked at my accountants advice.

The problem is that in ROS if you tick the non resident box, and ask for joint assessment, the system must give you the personal credit. Because the system says that married non residents with Irish taxable income must fill in a separate return where they have income abroad.

So when my accountant did the return in ROS the system gives the personal tax credit. And you could end up underpaying tax.

It is best to split the income and expenses because of the individual threasholds for the tax rate and the income levy.

A revenue official said the solution was to file separately. In our case we did not do this, as for our situation the revenue person agreed that he write a note in ROS and then she would manually remove (fix) it. They've been doing this for a few years now.

OP as your just starting out I'd file separately. (We didn't as it was difficult to divide up the rent and all sorts). Unless revenue or my accountant want to change this we are just going to continue). On another point, the revenue person told our accountant that 'technically' 20% tax should be withheld, but they're ignoring that for us (and others) as we are compliant tax payers etc and unlikely to default. Probably it's very difficult for them to adminster this.

The accountants on here might see if what I've posted is correct. I'm not good on ROS as I only did manual returns. And I'm long since past trying to do my own tax returns (what with tax credits, levies as well - used to be a whizz at all this but no longer).
 
Bronte said:
I've looked at my accountants advice.

The problem is that in ROS if you tick the non resident box, and ask for joint assessment, the system must give you the personal credit. Because the system says that married non residents with Irish taxable income must fill in a separate return where they have income abroad.

So when my accountant did the return in ROS the system gives the personal tax credit. And you could end up underpaying tax.

It is best to split the income and expenses because of the individual threasholds for the tax rate and the income levy.

A revenue official said the solution was to file separately. In our case we did not do this, as for our situation the revenue person agreed that he write a note in ROS and then she would manually remove (fix) it. They've been doing this for a few years now.

OP as your just starting out I'd file separately. (We didn't as it was difficult to divide up the rent and all sorts). Unless revenue or my accountant want to change this we are just going to continue). On another point, the revenue person told our accountant that 'technically' 20% tax should be withheld, but they're ignoring that for us (and others) as we are compliant tax payers etc and unlikely to default. Probably it's very difficult for them to adminster this.

The accountants on here might see if what I've posted is correct. I'm not good on ROS as I only did manual returns. And I'm long since past trying to do my own tax returns (what with tax credits, levies as well - used to be a whizz at all this but no longer).
Click to expand...

Hi Bronte,

If it works for you, happy days.

Just to clarify, is there anything to stop you (ie whichever of you is the non-assessable spouse) now registering afresh for income tax & filing separately in future years?

Also if you appoint an Irish resident person to act as your "collection agent" (even in name only), you can legitimately avoid the requirement for the tenant to deduct 20% tax at source. The drawback is that the tenant is legally on the hook if you fail to file a return or pay your taxes but, knowing you, this is a remote possibility :)
 
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