As Australia becomes more competitive on a global market M Squared & Associates is seeing an increase in Australians deciding to move overseas. Whether it’s for the adventure or for that dream job we’re the experts in assisting individuals in minimising their overseas tax implications and ensuring ongoing Australian compliance. There are a number of questions our specialists hear on a daily basis that we’d like to shed some light on today.
Firstly, the most common and all-encompassing question we’re asked is-
“What do I need to do?”
When you move overseas on a long term basis you may becomea non-resident of Australiafor taxation purposes. There are a number of things you have to do to satisfy the non-residency requirements.
Firstly you need to establish that you have a permanent residence or home in another country. This usually means entering into long term rental or buying property overseas. Shared accommodation, hostels, or moving around constantly (backpacking is a good example) without a permanent residence can sometimes make it difficult to establish non residency.
A common question asked by the ATO is does the taxpayer have a home available for their use in Australia? It doesn’t mean that you have to sell your house, but it is best if it is rented out and when rented out it is best also rented out for a long term. Having it listed on sites such as airBNB for example may not be in your best interest as these sites allow you to occupy the property and only make it available for rental for limited periods of time. You don’t need to stress about losing your principle residence exemption for capital gains tax as main residence properties can be rented out for up to six years before that becomes an issue. There are however additional tax implications that will need to be discussed with your tax agent.
As a non-resident of Australia you will still pay taxes on any Australian sourced income. That includes any rental income, bank interest accrued, and unfranked or partially franked dividends. Dividends are complicated in their own right and really need to be discussed with your tax agent.
Most rental properties in Perth and Australia are negatively geared and therefore run at a loss. Because of this they are usually not taxable, however you will still be required to file an Australian tax return declaring the extent of the loss. In the event that your property is generating a profit you would be taxed at non-resident tax rates. The rate changes on a yearly basis but for the 2014-2015 financial year they are as follows:
Tax on this income
|0 – $80,000||32.5c for each $1|
|$80,001 – $180,000||$26,000 plus 37c for each $1 over $80,000|
|$180,001 and over||$63,000 plus 45c for each $1 over $180,000|
Your superannuation will be locked up and you will not be able to contribute to any self managed funds. Unless you are a temporary resident of Australia, you will not be able to withdraw your super until age 60. If you have a self-managed super fund you will need to contact your adviser as there are many issues that arise on you becoming a non-resident.
Some of the most common mistakes or troubles we see with clients claiming to be non-residents are mostly in line with not having an established home overseas. For instance someone who lives internationally and travels frequently with no place as a “home” will have more trouble satisfying the criteria for a tax non-resident.
Those who also work on a fly-in, fly-out type schedule who have not established a “home” in a foreign country but instead return to Australia on their off time or traveling or staying in shared accommodation/dormitories might also have difficulties in proving they have satisfied the criteria of establishing a permanent residence or home in another country.
It should be noted, however, that every situation different. What was successful for one person might not work for another. It is for this reason we recommend having a consultation with a tax agent before you move overseas.
As long as you’ve taken the right steps when you leave returning to Australia shouldn’t be an issue. If you arrive in the middle of the financial year half of your rates will be taxed at a non-residential level and vice versa.
How We Help
M Squared is a specialist in international tax law. We usually assist our clients through every stage of establishing non-residency with the ATO and handling any disputes or queries that arise. Our specialists take pride in helping you work towards the business and tax solutions that work for you. If you need assistance with your residential status for tax purposes please do not hesitate to contact us today.