Renting out Irish house while abroad

[crobo]

My partner and I will be moving to Australia shortly, most likely on a permanent basis. We own a house here and would like to rent it out to the local authority under their RAZ scheme . We would get about €800 per month for it which is a good bit below market value but as we would be gauranteed the rent every month I see this as a good option. Will we need to pay tax on this €800 extra income? Our monthly mortgage is currently about €1100. Will this be taken into account?

Also we are first time buyers and will have lived in the house for over 5 years by the time we move. We will still have nearly 2 years first time buyers tax relief left to claim as I understand it. Is there any way to avoid loosing this benifit?

 

[ClubMan]

Will we need to pay tax on this €800 extra income?

I presume that it will be assessable for income tax as normal. See the Property Investment FAQ and key posts.

Our monthly mortgage is currently about €1100. Will this be taken into account?

The interest portion can be set against rental income when doing your rental income return. See the Property Investment key posts - in particular the one about interest only mortgages for investment properties in order to maximise the relief available.

We will still have nearly 2 years first time buyers tax relief left to claim as I understand it. Is there any way to avoid loosing this benifit?

I don't think that you lose this and believe that you can claim it if/when you return and have a mortgage on a family home here again.

 

[Domo]

As a non-resident landlord, tax should be withheld from the rent at basic rate by whomever is renting the property, unless you put in place an agent to act on your behalf.

As non-resident you will be liable to income tax on Irish source income each year. You will therefore have to complete a tax return declaring your rental income (or loss) and any other Irish income (e.g. bank interest, Idish dividends etc).

 

[tigger]

Domo is correct about the fact that your tenant is strictly obliged to deduct tax if they pay the rent to you in Australia.
To avoid this you should arrange that they pay the rent to somebody resident in Ireland. A relative is the obvious suggestion.

Although you should by law file an annual tax return in Ireland because you have Irish Income, you will have no Irish Income Tax liability. Your annual rent calculation will be approximately as follows:

Rent received 12x800 or 9600
Interest on mortgage 12x1050 12,600
Net loss 3000
​

Gradually the interest part of the repayments will reduce and (we hope) your rent will increase and eventually you will have a net profit rent.

Only when the cumulative net rents are profit will you be liable to Income tax.
Good luck below.

 

[Domo]

Having the rent paid to a family member will not change the rules, unless the family member is registered as your agent with the Revenue.
Strictly speaking the rent should still be paid net of tax unless an agent is in place.

You can of course arrange to have a relative appointed as agent.