Tax liability of daughter working in Australia
Syndey Opera Housee: Irish tax law and the double-taxation accord with Australia state that you are liable in Ireland for any tax due on rental income from an Irish property. Photograph: David Gray/Reuters
My daughter is Irish and worked in Ireland for about 10 years before emigrating to Australia in October 2012, where she is now in employment and pays Australian income tax.
She plans to return to Ireland in the next three years.
She owns and rents an apartment in Dublin, which is in negative equity and which does not generate any taxable income. She remits monies to Ireland to fund the shortfall between her mortgage repayments and her rental income. She has not and does not intend to visit Ireland for more than a few weeks in any year while working in Australia.
Can you please advise on her tax status in Ireland during her time in Australia. Is she liable to Irish income tax on earnings in Australia or on remittances to Ireland and must she complete an Irish tax return during her stay in Australia? Also, what will be her position when she returns to Ireland and begins to work here again?
Mr GD, email
The Irish tax code is built around concepts of domicile, tax residence and ordinary residence. They are detailed and can be confusing. Things get even more muddled when you are working abroad as that country, not surprisingly, generally feels entitled to tax you on income earned within its borders.
To compound things, there are then a series of bilateral double taxation treaties between countries. These are designed to manage conflicts when it appears that two different jurisdictions are seeking to tax the same income (or other asset).
To be fair, these agreements are very useful to an increasingly mobile workforce, but they are certainly not meant for easy reading.
Your daughter’s position is that as someone domiciled here (seeing this country as her permanent home) and ordinarily tax-resident here (having paid income tax on earning here for three successive years), she is deemed to be liable for tax in this country on her worldwide earnings.
That clearly conflicts with the Australian authorities’ view that even as a non-resident, she is liable to Australian income tax on her earnings over there.
The solution is in a provision in Irish law that states that even Irish-domiciled individuals are not liable to tax in Ireland on income from a trade or profession or employment carried out entirely outside Ireland.
Your daughter is paying tax on her Australian earnings in Australia and is fully compliant in doing so. When she returns to Ireland, she will again become liable to Irish income tax on any income arising here.
The one complicating factor for your daughter is her property. Regardless of where she is based, Irish tax law and the double-taxation accord with Australia state that she is liable in this country for any tax due on rental income from an Irish property. Essentially property is taxed in the country where it is located rather than where the owner is located.
You point out that the property is in negative equity and that the rental income does not even meet the mortgage payments. Unfortunately, that is not a deciding factor. The issue is that there is rental income and, subject to certain deductions, this is liable to income tax in Ireland, for which she will have to file a return.