Advice on tax on rental income and occupational pensions

[Matilda2025]

Do any of the accountants provide an initial free consult? I am trying to plan for next year when we plan to go to Australia on a temporary five year visa. I understand that this means I continue to pay tax in Ireland and would like to get an idea of what my income will be in advance. I do intend to get a company to do my taxes when we go and act as a collection agency.

I have tried one of the online calculators but this takes PRSI off and I don't think I would pay PRSI on rental income and occupational pensions and wasn't sure how to offset expenses like mortgage income relief.

I can provide figures if anyone here can help.

 

[S class]

You definitely won't pay Prsi on occupational pensions.
These are class M and this is zero rated.

If you were resident in Ireland you would be liable for Prsi on your rental income.
This is currently 4.1%.

I don't know if this would be charged if you were non resident.

If you are in receipt of the State Contributory Pension you don't pay any Prsi.

 

[Dr Strangelove]

I don't know if this would be charged if you were non resident.

No PRSI on rental profits for non-resident landlords.

I can provide figures if anyone here can help.

It would help if you could set out:

Gross rent per annum
Mortgage interest per annum
Other expenses per annum
Value at time of purchase
Value today

There is a potential CGT liability on the house as well when you ever sell.

 

[Matilda2025]

Thanks Dr Strangelove
Gross rent 1800pm
Mortgage interest 3000 py
Not sure what other expenses
Value at purchase 2016 195000
Value now 300000
Note was rented for one year 2018 to 2019
Income
Me occ pension 33000

Oh occ pension 912

House in hubby's name Mortgage in both
Would like to know how much we will have to pay Mortgage and live on.
Also if we sell say in 5 years what cht would be liable.

 

[Dr Strangelove]

Gross rent 1800pm
Mortgage interest 3000 py
Not sure what other expenses

Income tax

Item	€
Gross rent	21600
Mortgage interest	(3000)
Miscellaneous other (including agent)	(2000)
Profit	16600

So you will have €16,600 annual profit. Assume it is split 50/50 between spouses so €8,300 each. This is taxed at a flat 20% so €1,660 in income tax each. I know nothing about Australian tax but you may have a tax liability in Australian on the Irish rental profits. The tax paid in Ireland can probably be used as a credit against this Australian liability and may well in fact exceed it.

CGT

Value at purchase 2016 195000
Value now 300000
Note was rented for one year 2018 to 2019

For simplicity assume you stay in Australia from the end of 2024 and sell the house in 2026 for €335k. That's a capital gain of €140k. It will have been your PPR for seven of the ten years so seven tenths (70%) of the increase in value is exposed to CGT at 33%. So very roughly you will have a CGT bill of 70%*€140k*33%=€32k. There are various extra things you can offset such as legal fees and marketing expenses. But bear in mind that a) you already have a capital gain which is sheltered from CGT except for the one year 2018-2019; b) even if house prices stay the same you build up a CGT liability for every year you stay in Australia. This is a hard concept to wrap your head around but consider it carefully. CGT has both a very high rate in Ireland (33%) and there is no indexation for inflation so the longer you stay in Australia the bigger the CGT bill.

However, any CGT liability is extinguished if (a) you moved abroad for the purpose of employment; and (b) you return to the same house and occupy it for at least 12 months before selling. But I know a guy who move abroad and returned to live in a different property and had built up a CGT liability which ate into a lot of the financial benefits of a higher wage abroad. Swings and roundabouts.

PS: Choose tenants very carefully. There is potential for a bad tenant to cause you more problems than tax ever will and you are literally half a world away.

PPS: Happy to be corrected on all of the above. Seek professional tax advice too.

 

[Matilda2025]

Thanks for this Dr Strangelove very helpful. My understanding is that I would not be liable for tax in Australia as it is a temporary visa but will definitely take advice. I hope to rent to someone I know hence the 1800 rent, I think the going rate is 2000 in my area. Do I pay USC as well?