All Topics / Legal & Accounting / Living in Australia but working and taxed in PNG with Investment property here

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  • Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Hi

    We have just got our first investment property up and running all going good. My husband has just been offered a job working in Papua new Guinea where he will also be taxed under their system. Our question is if he pays tax over there how does he go about claiming a deduction for the investment property that is negative geared in his name only. We know he won't be taxed in this country because of the double tax treaty, but how will all this effect the investment property owned over here in his name only.

    Any help is appreciated.

    Thanks JPS25

    Profile photo of Grow SMSFGrow SMSF
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    @evolve
    Join Date: 2009
    Post Count: 66

    Jps,

    Have you received advice in regards to whether your husband will be an Australia resident or not for tax purposes?

    This will have a lot to do with giving an appropriate answers.

    Cheers

    Grow SMSF | Grow SMSF
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    Self-Managed Super Fund (SMSF) Specialist Accountants

    Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Hi Evolve'

    He will still be classed as an australian resident wages after tax paid into au account but tax and super paid in PNG

    Ist Investment so not sure how this will effect it next year. This years all done ok and straight forward as still working here at present possible job offered after we had seen our accountant.

    Thanks for any advice you can give

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    I think he will need to lodge a tax return in PNG and pay tax there. If there then he will also have to lodge a tax return in Australia and declare the same income and his property and get a credit for tax paid over there. The negative  geared property will reduce his tax payable in Australia. Depending on the tax laws in PNG he may also have to declare his other Australian income such as rental property income.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Grow SMSFGrow SMSF
    Participant
    @evolve
    Join Date: 2009
    Post Count: 66

    Terry has it right.

    If he is still an Aussie resident for tax purposes then he declares all worldwide income (i.e. including PNG income with a credit for PNG tax paid).

    Negative gearing runs as normal.

    Your accountant should be able to confirm all this and give specific estimates as they will know more detail about your personal tax situation.

    Good luck with everything

    Grow SMSF | Grow SMSF
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    Self-Managed Super Fund (SMSF) Specialist Accountants

    Profile photo of JPS25JPS25
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    @jps25
    Join Date: 2010
    Post Count: 121

    Terry and Evolve,

    That sounds good to me. Glad he will still be able to claim for the IP alright.

    Thankyou both for your help

    JPS25

    Profile photo of JPS25JPS25
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    @jps25
    Join Date: 2010
    Post Count: 121

    Hi Terry  and Evolve,

    To give you an update, and ask for more help please

    Well he took the plunge and is now working in PNG 24 days on 18 off.  Done lots of reseach but still a few grey areas as I heard that although he will get a tax credit for tax paid in PNG and I have looked on the ATO to see how this is worked out, what I am hearing differently is about whether or not he can claim a tax refund on depreciation and deductable costs for the IP, if he has not paid tax in this country. This year he will have done for the first 3 months of this tax year, but what happens over the following tax years? Does it get banked until he is earning in this country again? Main reason for asking as we would like to get a 2nd IP but want to know we have this bit right first as we keep getting told different things. He will still be classed as an Aussie resident not PNG but his taxes will be paid over there and then his net converted back to AU and paid into his bank account over here.
    Checked on the tax rules in PNG and he doesn't have to declare rental income from here so therefore sounds like he cannot claim the depreciation and deductions out of his PNG tax?

    Any help or advice will be appreciated

    Thanks Jean

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Thanks for the update JPS.

    I think there is nothing different about claiming depreciation and other costs etc for a non resident.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Hi Terry,

    So what you are saying is at the end of the PNG tax year he can claim for the Ip that we have here through his taxes over there, he just has to arrange time to see a tax agent over there and do it the same way he did here this year. He will be a non resident of PNG and still a resident of here. He is on a fly in fly out contract.

    Have I got that right?

    Thanks Jean

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    I would think he would have to file an Australian tax return and all the property would be claimed here. Not sure of PNG's requirements but he may have to declare Australian income there too.

    If it results in a loss here, that loss would be carried forward unit he gets an income here to offset it.

    But I am only guessing really.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Storm DStorm D
    Member
    @storm-d
    Join Date: 2010
    Post Count: 2

    Hi JPS

    In PNG, Salary and Wages returns for employees is submitted by the employer through a ‘group tax return’.  The employee would receive (after the Group Tax Return has been accepted by the tax office) a Statement of Earnings for the tax year (ending 31 Dec) which shows the salary earned and taxes paid.  No individual tax returns are required if the only means of income is through paid employment.

    When your husband lodges the tax return in Australia for the Australian tax year, he would declare his PNG income as well as the tax paid on that income, and would be able to claim all allowable deductions in Australia including depreciation on the investment property.

    The tax paid in PNG is applied based on benefits received in country and does not take into account any transactions out of PNG.

    Hope that helps. 

    Cheers

     Storm
    Port Moresby, PNG

    Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Thanks Terry,

    We would have a loss, so looks like it will get banked for a few years or so

    At least we know where we are for the second IP and know not to rely on tax refunds, I know if we keep it reasonable we can do it as I have already done some figures, just didn't want to miss out altogether.

    One point though if they are banked and he doesn't work in aus again stays working out in PNG say till he retires, if he sells an IP can the banked credits be used to offset some of the capital Gains?

    Thanks again for your help.

    Jean

    Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Hi Storm,

    Thanks for your answer.
     
    Its nice to find someone actually based out there. Sounds like the way it was done in the UK we never had to put in tax returns every year. One question though we knew about the tax year running from Jan 1st to Dec 31st and that he would receive a statement of earnings, when he see's the accountant over here next July/August the money earned in PNG from Jan to June does he have to apply for another statement for that period or will his tax just always be 6 months behind here, and amendments put in for each year to correct things.

    Thanks again for the info,

    Jean 

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    If there is a loss built up and he never comes back and later sells the house here this loss should be able to offset the capitals gains.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Thanks Terry,

    That is good news, I guess the same goes if he sells while still working in PNG the rollovers will reduce his capital gains then too. I know he can take a whole year off and reduce capital gains that way, picked that up from the guy doing a tax seminar from the ATO in Brisbane a few months back. Before Paul got offered the job overseas typical.

     I don't mind going ahead with a second IP now, just got to find the right one still reseaching while Paul gets settled into his new job out of Port Moresby and obviously need time there before applying for another loan.
    The first IP we did through using the equity in our home mortgage as collateral, on an I/O loan with 100% offset attached. We don't use the offset only couple of $s in it. We just use it for receiving rent and paying interest payments on the loan, as we have one attached to our home loan which we fully utilise including the instant transfer of rent into it on the day it hits the account. We are thinking of doing an I/O LOC for 22-23%  to cover deposit and expenses and then take out an 80% I/O for the reminder. 
    May just have to build up a bit slower than planned.

    Thanks again for your help I really appreciate it, You guys on here are great.

    Jean

    Profile photo of Storm DStorm D
    Member
    @storm-d
    Join Date: 2010
    Post Count: 2

    Hi Jean,

    The Statement of Earnings is issued by the tax office annually. However, he can get a transaction history of his Salary and taxes paid on his Salary (in PNG) from his company's HR or payroll division to suit the Australian tax period.

    Cheers
    Storm

    Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Hi Storm,

    Thanks very much for that info, certainly beats having to do amendments every tax year.

    Jean

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