If you are not resident in Australia and have not been for over two years, even though you are dual citizens, you should not be treated as Australian tax residents.
Tax question of dual UK-Australian citizens
My wife and I are dual UK and Australian citizens and we are considering investing in a property in Australia which we would rent out before moving there in several years’ time. We live in the UAE and also have two properties in the UK. We pay some tax on our UK rental income but want to make sure that the income from the new house wouldn’t increase our UK tax liability or that we would be taxed twice on the same money. If we are liable to tax is there any way of reducing it? CD, Abu Dhabi
As you are not resident in Australia and have not been for over two years, even though you are dual citizens, you should not be treated as Australian tax residents. If you buy a rental property in Australia then the net profit is taxable in Australia. If the result is a loss then this is carried forward in Australia and may be available to use when you next become resident in Australia to offset income, or capital gains tax on sale of the property. As in the UK the net profit, or loss, is reduced by expenses relating to the property. These would include the rates, insurance and cost of maintenance. Interest on a bank loan used to buy the property would also be deductible. If there is a profit in Australia, then tax would be payable there and under the double taxation agreement between the two countries it would only be payable once provided you submit the right annual returns to the relevant tax authorities.
Keren Bobker is an independent financial adviser with Holborn Assets in Dubai. Contact her at email@example.com