Speak with an Australian Expat Financial Adviser

Rental income received from property located in Australia is considered Australian-sourced income. This means it may be subject to tax by the ATO, even if you reside overseas. As a non-resident Australian Expat, special foreign resident tax rates apply, which preclude you from the tax-free threshold of $18,200. This results in rental income up to $135,000 being subject to a tax rate of 30%. Australian Expats are still eligible to claim the associated running expenses incurred from owning the property. Hence, Expats should consider maximising their available tax deductions. This may include a depreciation schedule. Other considerations may include limiting funds in an offset account or ceasing additional loan repayments, and utilising tax-deductible contributions to their Australian superannuation fund.

If you are considering paying down debt but also want the option to access the funds later, an offset account or redraw facility are common features of Australian mortgages. While both these features have the effect of reducing your loan amount, each has very different tax implications should the funds be accessed later. If funds are accessed from a redraw facility, the interest on the loan may no longer be tax deductible (depending on what the funds are used for). Therefore, potentially forgoing years of future tax benefits. For this reason, it is critical to plan ahead when contemplating the use of a redraw or offset account.

Did you know you could use the equity in your existing property to fund your investment in other assets? This is done by accessing the useable equity in your property. 'Useable equity’ is calculated as the equity in your property that is above 20% of the property’s value (e.g. a property worth $1 million with a $500K loan would have ‘useable equity’ of $300K). When you access this equity, it is often referred to as an equity loan/release. Utilising your ‘useable equity’ to fund the purchase of other investable assets such as shares or property is a common strategy used to build wealth. If you decide to access the useable equity to fund the purchase of an investment property, the interest on the loan may be tax-deductible, providing a tax benefit.

FRCGW applies when a non-resident Australian Expat sells a property in Australia, regardless of the sale price. Where this is the case, 15% of the contract price is withheld and remitted to the ATO at settlement on behalf of the non-resident vendor. The FRCGW acts as a tax credit that the Australian Expat can utilise upon filing their Australian tax return. Australian Expats should be aware of this when selling property in Australia to ensure they are prepared and plan to receive reduced sale proceeds as a result of the amount withheld under FRCGW.