Need an accountant familiar with Irish Tax system? (Melbourne if possible)

Smellbourne

G'day all, I’m a long time reader, first time poster.

I’m on the hunt for an accountant in Oz who is familiar with the Irish Income Tax system. In particular foreign rental income and the process of Australian Tax returns when declaring these. What would be ideal would be an Irish accountant now residing in Australia (preferably Melbourne) who can do tax returns (Australian and Irish if possible) and knows all the ins and outs of allowable deductions and what’s legit in completing these returns.

In a nut shell, I have a house in Ireland that I bought before having to leave for Australia 6 years ago when work dried up. Like it or not I’m now stuck with this property for the long haul. I have the property rented at home but need to send back money each money to cover the mortgage shortfall. I have always completed both my Irish Tax returns and Australian one by myself however I am certain there are areas where I’m losing out on deductions that could help minimise the amount of money I already have to shell out at tax time to both Ireland and Australia tax offices! As I’m due my first child shortly I’m eager to get my affairs in order and save where I can.

I have talked to many ‘tax return specialists’ and a few accountants in Melbourne but they aren’t familiar with the foreign Income situation and they just tell me what they think I want to hear (which from experience I know for a fact isn’t correct/ legitimate deductions)

So if anyone knows of an accountant here who can do the Australian Tax return (and Irish tax return if at all possible) I would really appreciate if they could point me in the right direction. If they are Irish too than that’s even better!

What I’m not after is one of those tax firms who just fill out the e-tax forum for you but have no accountability for their dodgy dealings.
I would of course pay the going rate (as this too is a legit deduction:-)

Any help would be appreciated and thanks in advance.

S

NorfolkEnchants

How's it going.

Can I just ask as a first question - are you or your spouse (including de facto) an Aussie permanent resident or citizen? Or are you here solely on a 457 visa or similar?

Smellbourne

Both on PR with citizenship just a few weeks away hopefully

Bold Abdu

I just sent you a PM

NorfolkEnchants

OK, so you do need to report the Irish rental in Australia.

Essentially, the rental income is treated a little differently in Ireland than in Australia. The fact that you are saying that you are transferring money home to pay the mortgage means that the property seems to be negatively geared (i.e. in a loss position as a rental investment, though it's worth pointing out that only the interest element of the mortgage payments is deductible, not the capital repayments).

Any losses will offset other income in Australia (i.e. you can get a refund of PAYG as a result of losses on your Irish property) and the reporting from an Australian perspective will follow Australian rules for rental properties, albeit reportable at Item 20 of your return (foreign income) rather than Item 21 (Rental income). See the attached link for AU rules on rental properties and info on deductible income and expenses: http://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties-2012-13/

Ireland is a little different, as Case V rental losses are ring fenced to be used against other rental income only. Still reportable, and can still be in a loss position, but can't be offset against other income (by the by, if the government ever changed this ring fencing rule then it could be the shot in the arm the property market needs in Ireland, but would cost a fortune in taxes).

Note that in Ireland, deduction for mortgage interest expense is limited to 75% of the interest element of the repayments.

Irish guidance here: http://www.revenue.ie/en/tax/it/rental-income.html

Hope it's some help, it's not the most complicated thing in the world if you want to do it yourself.

Smellbourne

Thanks for all that info Norfolk Enchants, your handle of this whole thing boggles me! (possibly why I need an accountant)

I’m relatively savvy on the accounting sides of things (for a non-accountant) having completed the previous years of the returns myself for both counties (incl. declaring the foreign rental income on my Australian returns in the past) via etax and ros.ie. However it’s your mention of the ‘losses will offset other income in Australia’ that has me intrigued.
Please correct me if I’m wrong but In its most basic form on the Irish side of things;
–> Declare total rental income for the year (rent received per month *12)
-minus relative deductions (75% of mortgage interest + maintenance works/Wear and tear(12.5% to 8yrs)/ advertising costs/replacement sink etc etc.)
Then pay Tax to revenue in Ireland on the remaining amount (approx. 20%). I’ll call it ”Figure X”

However when I then do my Australian return ,I once again declare the foreign rental income as the total rent received over the year (at their conversion rates to au$), and then also how much tax I have paid already (in Ireland) on it as well.
I don’t know of any additional deductions that would/could be included here though as they should be captured in the Irish Return so I figure there just concerned with the final ‘out of pocket amount I paid’ to revenue in Ireland “Figure X”

I seem to still end up paying an additional portion of tax on the total foreign income to ATO although I have paid the required amount in Ireland and even though I’m making a loss each month (from topping up the rent to pay the mortgage)

Is it somewhere in my return I should be noting that I am “negatively geared” and this will allow for the “losses will offset other income in Australia” as from my etax return it wouldn’t seem to ask enough information to determine this fact under Item 20 (just – foreign Income and foreign Tax paid against said income)

I really appreciate your assistance as this is something I have been confused with for 3 + years and can’t seem to understand – But this could just be more of a case for me to find perfect Aus/Irish Accountant. Don’t suppose you’re interested

Thanks again for your time
S

Alan Shore

Hi

Firstly you need to clarify for yourself what a rental loss for tax purposes is.

When your rent is less than 75% of mortgage interest and allowable deductions you have a rental loss.

Where your rent is less than your annual mortgage repayments and expenses you have a cahflow deficit.

So if you have a profit in Ireland as a non resident you pay tax at 20%, there is no PRSI and if your income is less than €10,036 you pay no USC.

In Australia you will have to pay your marginal rate of Income tax plus social insurance and then get a credit for the income tax paid in Ireland. This may give rise to an extra liability if your marginal tax rate is higher than 20%.

The first question I'd ask is what % of mortgage interest do the ATO allow.

Aemtler

Alan Shore wrote: »

Hi



The first question I'd ask is what % of mortgage interest do the ATO allow.

The ATO allows 100% of the interest on a buy to let loan as a deduction for Australian tax purposes.

The net income for Australian tax purposes will be lower than the net income for Irish tax purposes.

Aemtler

Rental Income per year
Rent 12,000

Mortgage Payment per year
Interest 8,400
Capital 7,200
Total 15,600

Ireland
Rental Income 12,000
Interest deduction (75%) -6,300
Depreciation -400
Repairs -200
Advertising -100
Net Income for Irish purposes 5,000

Tax @ 20% 1,000
* No PRSI
* No USC as net income below €10,036

Australia
Rental Income 12,000
Interest deduction (100%) -8,400
Depreciation -400
Repairs -200
Advertising -100
Net Income for Australian purposes 2,900

Tax @ marginal rates
For example 37% plus 1.5% medicare levy 1,116.50

Less credit for Irish Tax -1,000

Additonal Australian Tax 116.50

Aemtler

Sorry, I tired to make the formatting a bit better, but I couldn't do it to well.

I have tried to do a simple example. As always with tax, there are are always a million and 1 individual circumstances to consider etc.

I haven't checked whether tax depreciation rates are different between Australia and Ireland

NorfolkEnchants

Thanks Aemtler, I logged back in this morning to do exactly the same example so you saved me a job!

OP - important to note that claiming the expenses in both locations is allowed, albeit with slightly different rules regarding capital allowances (depreciation) and mortgage interest.

The Irish taxes paid is a credit in Australia (i.e. an amount that reduces your final tax liability), and not a deduction (i.e. an amount that reduces your taxable income).

Smellbourne

Thanks for all that Aemtler and NorfolkEnchants, especially the examples, they really help in making sense of it all.
I think I have got my head around it but might just run it through 'etax' (as a hypothetical example) to see if I really have the correct grasp on it all.
The fact that Aus allow the 100% of the interest as a deduction against the rental income should make a difference in my case and should hopefully leave me with a few less quid to have to pay off.

Thanks again for all your time and input and should one of you be working as a tax agent in Australia at the moment or some day, please PM me as I'd (and friends in similar situations here) have a bit of work for you

Cheers

S