Are you going to work overseas? If so, you will be exposed to various tax consequences. The starting point to determine the tax impact is whether you remain resident of Australia for tax purposes, or whether you become a tax non-resident under Australian laws.
When living overseas, there are three possible tax scenarios:
- You remain an Australian tax resident and are taxed on all worldwide income, but credits are available for foreign taxes paid.
- You remain an Australian tax resident under our law, but also become a tax resident of the foreign country. If there is a Double Tax Treaty with that country, then Australia’s ability to levy tax will be limited or excluded.
- You become a non-resident under Australian laws, and only taxed in Australia on certain income and gains from Australian sources.
You will be considered an Australian tax resident if you fall within one or more of the following categories:
- Whether you reside in Australia. Important factors to determine this include your intention, family and business/employment ties, social and living arrangements, maintenance and location of assets.
- Where you are considered ‘domiciled’ or permanently residing in Australia, then you will be an Australian tax resident unless the ATO is satisfied that your ‘permanent place of abode’ is outside Australia. ‘Permanent’ generally means two years or more, but factors such as whether a home is established overseas and the connections maintained in Australia are also relevant.
- Physical presence in Australia for 183 days or more in a tax year generally triggers Australian tax residency
- Membership of a specific Commonwealth or public sector superannuation scheme or spouse/child of such a person.
To cease being a tax resident of Australia, you would generally need to depart Australia with the intention to live abroad for a minimum of 2 years, be accompanied by your immediate family/dependents, and have rented out or sold your home in Australia.
How common income items are taxed for Australians working abroad
Below is an indication of how common items are taxed depending on whether you are considered a resident or non-resident of Australia. Note that the application of any Double Tax Treaty in place will generally prevail over Australian laws.
Residents
- Employment income – Generally Australian tax residents are liable to pay tax on income earned from overseas employment. A resident may claim a foreign income tax offset (FITO) where this income is taxed in the relevant foreign country. Other exemptions and concessions may apply in limited circumstances. (eg approved overseas projects)
- Investment income – All worldwide investment income for residents is taxable in Australia. Where a resident purchases shares with borrowed funds to earn dividend income, certain share portfolio expenses such as interest are deductible. Rental income for properties located worldwide is taxable in Australia.
- CGT – A capital gain arises where the proceeds of disposing an asset exceed the amount paid for the asset plus any transaction costs. Assets held for more than 12 months will qualify for a 50% general discount, such that only 50% on the gain is taxable.
- Medicare levy – Residents pay a 2% Medicare levy on their income. An additional surcharge may also be payable where residents exceed certain income thresholds (unless prescribed private health insurance is held).
Non-residents
- Employment income – Income from employment services will generally be regarded as being ‘sourced’ from the location where the services are performed. Where employment is sourced in the foreign country, no Australian tax will be imposed.
- Investment income – Interest, royalties and dividend income on Australian investments of non-residents are subject to withholding tax of 30% for unfranked dividends and royalties, 10% for interest and 0% for fully franked dividends. Withholding rates may be reduced by any double tax agreements between Australia and the other relevant country. No claims can be made for deductions for share portfolio expenses. Income from investments in foreign countries held by non-residents is not taxed in Australia.
- CGT – Only certain assets (such as real property located in Australia) are subject to capital gains tax for non-residents and temporary residents. The 50% discount on capital gains ceased with effect from 8 May 2012 for non-residents. Be aware that the ability to claim the CGT exemption for a former home is in the process of being removed if you are not a tax resident at the time the sale contract is signed (subject to transitional rules).
- Medicare levy – Non-residents are not liable for the Medicare levy or surcharge.
- Rental income – This remains taxable for both resident and non-resident taxpayers in respect of property located in Australia and the net rental income needs to be included in an annual tax return, and tax paid on the assessment issued by the ATO. Deductions can be claimed on items like for repairs, interest on a mortgage, and agent fees.
Your individual circumstances
For Australians working abroad, the determination of tax residency is dependent on individual circumstances. A multitude of factors are taken into account and these change each year as the Courts decide new tax cases. We recommend that you discuss your circumstances with your Accru adviser to get an accurate picture of how your tax situation will be affected by an overseas move.
Accru Felsers assists multi-national businesses with inpat/expat tax effective salary arrangements for key senior executives as part of our international tax services.
The information in this article is up to date as at August 2018. Accru Felsers apologises for any delay in answering questions. If you have a complex international tax situation, high income, assets and/or superannuation, then consider engaging Accru to get the right advice for your specific situation to ensure your wealth is not put at risk. Please email your enquiry to Brett Cox.
191 Responses to “Australians Working Abroad – How will you be taxed?”
My wife and I are currently living in Nepal doing volunteer work and have done so since April 2015. Every year we live in Nepal for 9 months and come back to Australia for 3 months to spend time with our 5 children and 7 grandchildren. We are sponsored by churches and individuals to do the work in Nepal. Do we have to pay tax or put in a tax return?
Thanks for your comments on the article. If you are still living in Australia, then it is likely that you wouldn’t have ceased Australian tax resident status. The ATO would expect tax returns showing your worldwide income. If your work in Nepal was as an “approved overseas aid project” then income could be tax exempt in Australia. It would come down to the specific circumstances.
The minimum 2 years that is mentioned in this article for an expat working overseas to be considered non resident, is this tax year (financial year) or calendar year?
Thanks for your question Mina. The reference to 2 years was merely the intended period of absence from Australia from time of departure, and is not related to financial or calendar years. Regards, Brett
Good article thanks. I am living in the US working for six months sep 17 to mar 18 for our US subsidiary, then going back to full time employment in Australia upon my return. Do i need to file a W2 here in the US or can I do it all in Australia on my return? Thanks
Hi, I purchased an off the plan property in 2014 after selling my house. I decided to downsize because I live on my own and find the house too big for me. The apartment I purchased was to be completed in 2015, however, settlement only occurred this month 2018. As I did not have a place to stay and didn’t want to rent whilst my apartment is being built, I decided to go back home (overseas) to stay with family. As I waited anxiously to move into my new apartment, the vendor/developer kept extending the contract date for some unknown reasons. During the long wait, I become engaged and married in 2016 and now lived in the UK. Whilst away from Australia, I was taxed 32% for living overseas and I was treated as foreign investor on very little interest I earn in the bank and money I kept in term deposit to pay for my apartment once completed.
I am now planning to sell my newly built apartment but now reading your article it seems it is not a good option as I spend most time in the UK with my husband.
So even though I purchased and signed the contract in 2014 for the property but only settled January 2018 because of the long delay by the vendor, and reasons for me to leave Australia is because I have no place to stay, is this right for the government to treat me as foreign investor.
If you are living in the UK, then it would be appropriate for you to be treated as non-resdeient for tax in Australia. The UK will tax you on worldwide income and give credit for Australian taxes.
There are currently changes afoot to cancel the capital gains tax exemption in Australia for a house that was formerly their home. These changes are to take effect 30 June 2019, so probably good that you have sold bigger house already. There have been changes in Australia to impose higher land tax on foreign owners, so beware of that. This will depend on which State your apartment is located, and its value. Regards Brett
I am an australian citizen worked in US for 7 years, rented my australian property out, my only family member my son is attending school in China. When I have holiday I will meet my son in China. am I a non-resident australian for tax purpose? thanks
I am going to work on a large long term project permanent position in Saudi, approx 5 yrs + what am I liable for with regards to tax in Australia, the salary is broken down into 3/4 components – salary, accomodation, private medical insurance, flights. What would I be taxed on.
Hi Mark, Your tax obligations in Australia depend on your connections with Australia. Advice on this unique to your circumstances. We can provide advice if you engage our firm as tax advisers. Regards, Brett
Hi, as an Australian overseas resident, I build a house in Australia (Sydney). Should i pay a GST if I sell the house and will I prophet from the 50% discount on capital gains?
Will I be consider as a foreign investor?
Thank you in advance.
Hi Yarra, Australian GST would be payable where the house was built as part of an enterprise which you are conducting (in which case you would need to register and would be able to reclaim GST on building costs). If you are living overseas and not tax resident in Australia, then the 50% discount for capital gains will not be available (except if you owned prior May 2012, in which case transitional access may be available). Foreign investor status – there are different aspects. For income tax – sale of a home can suffer 12.5% withholding (can be varied). For land tax there may be a foreign persons surcharge. For foreign investment – there are rules around foreigners buying houses and also extra stamp duty. Regards, Brett Cox
had the AU state nominated 190 PR granted to me on 28 Aug 2014, valid till 28 Aug 2019.
We were then in US from 2015 till Nov 2017 as I was pursuing an MBA there and subsequently working there. We had validated the PR by entering AU/ Perth in March 2015.
I have arrived here on 13 Nov 2017 and my family on 29 Nov 2017. There has been an interest recently showed by one employer who would like to hire me. They are based in Florida US and UK as well. They are open to me travelling to and fro from AU to US and spend most of my time in AU. I am not sure of the days I have to stay in AY without affecting my future citizenship process. Need some guidance around that and a few other options i could work out.
Your query appears to revolve around citizenship more than tax issues. I would recommend contacting a migration lawyer or migration agent for advice in that area. Regards Brett
I emigrate to the USA last year on H1B visa, but hold a tenured professorship so expect to be here for the next 10 years until retirement, then who knows? – I will buy a house here and aim to get a green card. My wife and kids remain in Australia. Am I an Australian Tax resident? Various comments suggest that I will get slammed by the ATO (at least currently) even though I may not ever return to Australia, not even to retire. I also hold British Citizenship.
Hi John, Whether or not you are an Australian tax resident depends on the precise nature of your ties with Australia and a combination of factors. Your maintenance of a house in Australia is not determinative of your residence. We would need to know more about your family who are situated here and how often you visit them, as well as the existence of any other Australian assets. The outcome also depends on whether you can prove that your permanent place of abode is outside Australia, your habits and social life, alongside your intention not to make Australia your home. The double tax treaty between Australia and the US does specifically have regard to the place where “the individual dwells with his family”. Do you intend that your wife and kids will come to live with you in America? Are you an Australian citizen?
Hi there, I have lived and worked in Japan for 8 years with my family. I set up a managed investment when living in Australia in 2000. I want to sell and close down this investment. Will I need to complete an Australian tax return or will I have a CGT issue? Thank you. I am an Australian Citizen however have no current intention to move back to Australia.
Hi Laura
The capital gains tax position will depend on the choice that you made when you ceased as an Australian tax resident (were gains taxed in year of departure or deferred to time of disposal). Note if you are a tax resident of Japan then the Japan/Aust tax treaty can apply to override our normal domestic tax laws. We would need further details to advise specifically on that. Regards, Brett
We are thinking of moving to Hong Kong. If we as a family move but rent out our house in Australia, does that mean the only Aussie tax we have to pay is from the income from rent? Will that mean we have to do a tax return even if the rental income is under the tax free threshold?
Hi Julia
If you cease being an Australian tax resident, then you would still need to lodge tax returns and be taxed on the rent income. There is no tax free threshold for non-residents, you will be taxed from first dollar at 32.5%. Be aware that if you sell your home whilst non-resident after July 2019 you could have a capital gains tax on entire gain (main residence exemption being removed for non-residents). Regards Brett
Hi, I am a soccer player and accept a contract with a Italian club commencing 1.07.2016. First three month in Italy I have lived with my family, then I have rented a flat and move in. My bank payment goes to my new bank account in Italy which I have opened. I bought a unit in Sydney and rent it out. I have car which have given tony sister o drive while I am away. I am not married and my family lives in Sydney. unfortunately I got injury and my playing career is over. I return to live Sydney on 01.05.2017.
question ; Am I an Australian resident for the income tax years ending 30.06.16 and 30.06.17 and whether the income I receives will be assessable in Australia during these tax years.
This would be best to dealt with direct. Please make contact with us if you would like specific advice.
Hi,
I have asked to work remotely from Malaysia from my Aus employer to look after an elderly mother in law – duration indefintely.
Will I be considered a Aust Resident for tax purposes with the following:
-Salary paid by Aust company to foreign bank account
-I’ll maintain Aust joint bank account with spouse
-Super remains in an Aust super fund
-No property no investment in Aust
-I’ll be living in house (owned by spouse) in Malaysia
-My spouse and adult son remain in Aust
Thank you in advance.
You will need to determine your tax residency in Malaysia also. This combined with your citizen/visa situation, frequency and duration of visits to Australia, intended time in Malaysia (you mention indefinite – does that mean you have no intention to return to Australia?). If you are a dual resident the double tax treaty becomes relevant. This is a case of knowing all the facts ..something that requires one-on-one advice.
hi, i receive an invalidity military pension in australia which I am taxed for. I just moved overseas to Lithuania where I am a dual citizen (australian and lithuanian) and decided to resided here for indefinite period of time taking up residency in europe. Am I still considered an Australian Tax resident? Do I have to pay tax in both countries?
Pensions which are not exempt from tax are generally subject to tax in Australia unless you are resident in a country and the tax treaty with that country varies that position. There is no tax treaty between Australia and Lithuania – so default position is they are taxable in the source country (being the country of payment). Regards, Brett.
Hi Brett,
My partner(de facto) and I are going overseas in May this year, he will be working full time but I won’t be working as I need to take are of the baby. I have investment properties in Australia and a residential property too. I wonder if I need to sell my investment properties to avoid paying more tax when he does his tax return, will my small rental income would affect my partner’s tax return?
Thanks in advance and looking forward to hearing your reply.
Cheers,
laura
Hi Laura, Your circumstances will depend on specifics. Generally because tax returns in Australia are filed individually there is not much impact, but in some foreign countries there is joint filing of tax returns. For specific advice we would need to be engaged in the normal course. Brett
I’m an Australian working for a US company remotely and traveling to different countries every 2-3 months. Would I still be liable for taxes in Australia?
If you have established yourself as living in a foreign country then you may be non-resident of Australia. That will depend on your time and connection with Australia. If you haven’t established yourself in a foreign country then you would likely remain a resident here and subject to tax.
Hi Brett, if an Australian company is willing to have an office overseas. How does that work for tax purposes?
An overseas office will likely be a permanent establishment in that country and subject to taxation there. We would be happy to provide advice if you wish to contact me.
Hi – we own a property in Australia which we are planning to rent out while we work for a uk company for the next 2 years. Our mortgage will be $7000 per month once we convert to P&i but the rental income is only $5200. We are happy to supplement the monthly mortgage as we want to keep the house however I understand that in the UK we will have to pay tax on all of the rental
income even though we are making a loss! We are moving in 2 months time with our 2 small boys and we simply couldn’t afford this extra tax. I am extremely worried and it’s causing me significant stress. What can we do? Are we able to be classed as aus for tax purposes ( we are dual citizens uk and aus) and will be working for a US company. Weblog have an abn – is there a way we could convert the property to be owned by our companies? I would be extremely grateful for any advice!! Also is it possible to get a tax appointment with you to discuss our other tax matters?
Please note I gave the wrong email address – 2002 is the correct one
Hello,
I’m an Australian citizen, and I’ve been living in the U.K. for the last 13 years. I am currently a non resident for tax purposes. I am considering switching back to being a resident for tax purposes (I don’t work), and purchasing a property in Australia. Would I pay the regular stamp duty that all australian residents pay, or double stamp duty because i would be purchasing the property whilst living overseas? I’m aware that overseas investors pay double stamp duty. Which I would like to avoid! Thanks, Anna.
Dear Anna,
Since stamp duty is a State based tax, it will depend on the location of the property purchased. If in NSW, the law for Duty purposes does not treat Australian citizens as foreigners, and therefore suffer only normal stamp duty. Regards Brett
My son works in international Waters and sub contract to an American company who pay him. He is an Australian citizen but has worked for over 3 years with the American company and returns for maximum 30 days a year. He has no property , dependents or spouse in Australia . .Does he have to pay tax in Australia.
The tax position depends on your son’s tax residency position, and the facts of his living arrangements. I recommend seeking specific advice taking all this into account.
Can you help with a super question? Son living and working in Copenhagen. May spend life in CPH but also plans to live in Aus for up to ten years. Suspended Aus super fund here. Small balance. Should he join CPH pension fund or make payments back to Aus fund? Is this a tax, legal, super or FP question? Grateful for help.
Recommendation as to making superannuation contributions requires a financial planner licence in Australia, and full personal details need to be considered.
I am an Australian Citizen and considering moving to Singapore for work for 3 years. How does the Foreign Tax Offset work ? According to example on ATO website i can offset all of my Singapore employment income. But according to another private tax consultant site, I have to pay the difference in tax %. That is if Singapore charges me 7% tax and my tax bracket in Australia is say 30% , i have to pay the difference. ATO example disregards the % tax paid and says all your foreign employment income can be offset.
If you remain an Australian tax resident – you would pay the extra tax in Australia. There was an old law that exempted foreign employment after 91 days service – but that has been revoked. Maybe the ATO example is outdated?
If you ceased Australian tax resdiency then you would have a deffierent outcome.
Hi Brett, I am confused with how ATO define resident. My friend who works as tax accountant is telling me that I would be considered as resident for tax purpose for my circumstances below.
1. My partner and I are both PR but I have recently granted for citizenship
2. We have decided to move back to take care of our parents (not sure how many years) and rent out our house here.
3. My current work in Australia can accept me working from overseas.
4. We have intention of coming back to Australia but we just cannot give a date at this time.
So from my understanding, I would be taxed at 32.5% for my Australian income and not liable for medical levy as well.
But my friend reckons I would be taxed at resident rate.
Could you please shed some lights?
Regards,
Your tax residency will depend on which country you submit yourself to as your home (under the domicile concept) and the type/permanency of your accomodation/place of abode. The length of time you are overseas is important also. We can provide more precise advice if you wish to contact Accru for such.
Thanks for the info and responses, really helpful!
I am no longer an Australian tax resident as I have moved permanently to Canada, but I still have a client in Australia who I will work remotely for from home on occasion (I am a freelance Project Manager). Do I still need to do tax returns and report worldwide income as a non-resident?
Thanks 🙂
If you are a tax resident of Canada and performing the work in Canada, then you would not be taxable on such business income in Australia (in the absence of permanent establishment here). Beware of Australian GST if your client is not an Australian registered GST business and your work exceeds AU$75k annual registration threshold (or if you are already GST registered in Australia).
Hi,
We moved to Brunei for work 4 years ago and for these periods we lodged a non resident tax return. We have a rental property in Australia which we declare the income. We are now returning back to Australia. We have a some savings here that we’d like to transfer back to Australia. Will we be taxed on this money that we transferred?
Provided you were non-resident for Australian tax, then you will be able to bring the funds saved from your foreign work back into Australia without any tax impost here.
At first thank you very much for your extremely interesting blog! These issues seem to be very complex. However, my question to you as expert: Am living in Australia as PR, and have a rental property in Finland. I was told that I am only able to claim up to AUD 1000 as tax credit, even if taxes that I paid in Finland were over AUD 1000. I also would need to to apply if I want to have house loan interest expenses been reduced; and I would need to do a complete separate bookkeeping according the Australian model for the rental apartment. However, both countries are completely different, and I was surprised that only taxes paid in Finland up to AUD 2000 can be deducted. Weirdly, it seems I am on a tax rate of something like 60-70%, when I pay in Finland AND in Australia. Do you think I got the correct information?
The AUD1000 is a threshold that enables the foreign tax credit without needing to compare to the Australian tax on that foreign income. Claims above AUD1000 are allowed, but are limited to the Australian tax.
Hello,
I’m an Australian citizen, I’ve been living consciously in Dubai for the last 18 months and will stay here for another year. I am currently a non-resident for tax purposes. So could you please confirm me if I’m still obliged to file my Tax while working in Dubai.
Thanks
Alderi
Tax non-residents only need to file Australian tax returns for Australian sourced income (excluding interest or dividends which are subjected to withholding tax and so do not need to be declared in a tax return). Your last tax return covering the tax year that you departed should have disclosed your cessation of residency and flagged that future return are not neccesary to let the ATO system know that no returns will be lodged.
Hi Brett,
Not sure if you can help out with this, some basics:
– Australian citizen/resident for tax purposes
– Living in Australia long-term
– CEO of a foreign-owned/located corporation (located in KR), completing work for foreign company in KR – and in AUS
– Corporation is a Korean domestic corporation
1. If I receive dividends paid (foreign source income), what is the tax rate?
2. I will be taxed by the Korean Tax Authority at a rate of 22% for dividends paid – although a tax treaty exists that states the rate to be 15%. Which is correct?
3. Foreign income tax offset limit – as I will not be gaining any income from employment in Australia, how will my limit be calculated? I.e. ALL income will be foreign-sourced.
Thanks in advance if you’re able to answer some questions!
Izy
Hi Izy
As an Australian tax resident, your foreign dividends will be taxed at marginal rates in Australia but with credit for Korean withholding tax on dividends. The treaty rate of tax will restrict the level of Korean tax to 15% (you may need to claim treaty benefits or provide a certificate of tax residency). The foreign tax offset is allowed up to the level of Australian tax imposed on the foreign income.
If you wish further details, it would be best to contact Accru directly for advice.
Regards
Brett
Thanks for the article. I’ve been working in China for two years and am classed as a non resident in Australia as I don’t have dependants or assets in Australia. I get the feeling my employer is taking out more tax than they should. How would I find out what tax I should be paying?
Are you working for an Australian company or foreign company? Are you concerned about Australian tax being withheld or Vhinese taxes? Sorry – your question is a little ambiguous.
Hi,
I have just moved back to Aus after spending the last 3 years working in HK. I have considered myself as a non resident during that period have not paid taxes for that period. Just started a new job here in May and was wondering if I would have to declare my income in HK for the current tax period. If I have to do that would that mean I would have to pay tax on my HK income even though I was a non resident during that period.
Thanks,
Sav
Foreign income during your period as a non-resident does not need to be declared in your Australian tax return. You generally need to declare worldwide income from the time you commence as an Australian resident (unless temporary tax resident).
Hello my Australian employer is asking me to work in Japan where it has an entity for 6 -12 months. My Australian salary and bonus will be paid as normal by the Australian entity. I also receive rental income from my properties in Australia. Would I only be liable for tax under the ATO rules or is there any other tax implications that I need to be aware of?
You may well be subjected to Japanese tax, and will need to ensure that you comply with the requisite taxes there. The 183 day rule for temporary employment in the double tax treaty will need to be reviewed.
Hi Brett. I have some investment properties and am currently resident in Australia. If I move to work in China for a couple of years and I generate a small income in Australia from these properties (as there are still mortgages but some are no longer negatively geared), will this income be taxable in Australia or China? Thanks, Andrew
Rent on Australian properties is always taxable in Australia. It may also be taxable in a foreign country that you move to (with the possibility of credits for Australian tax to reduce foreign tax).
Hi – I moved to the UK in February and intend to be here for 23months, hence under the ‘2 year’ rule. I rent a house in the UK and have rented out my house in Australia (hence will have Australian income in the 18/19 year).
1) Am I tax-resident for 17/18?
2) Am I a tax resident for 18/19?
3) In 17/18, do I get slugged the full Medicare Levy and Medicare Surcharge, even though I wasn’t in the country for the entire year (assume Australian income until February wasn’t enough to pay surcharge, but worldwide income for the whole FY year will be).
You may well stay as a tax resident. But you will need to consider the impact of the double tax treaty between Australian and UK, which can override domestic tax laws and deem you to be a UK treaty resident.
I’m hired by an Australian based company but can work anywhere. If I decide to live for a few months in the Philippines do I pay taxes in Australia, Philippines or both?
Hi Rayee
Your Australian tax resdiency will need to be addressed first, and then the facts of your income and location applied. We would need more details to answer your question.
Hi Brett,
my wife and I are planning to redraw on our mortgage to finance a B & B that we will permanently relocate to in Germany in the not too distant future. We intend to keep the property in Australia as my wife will one day want to move back once I cease to be. The rent we receive from the property will not cover the mortgage and we intend to make up the short fall with foreign income. I’ve looked at the rules and its seems pretty clear that as non-residents only income in Australia will be taxed. We’re, therefore, somewhat alarmed at the prospect that the ATO will take 50% of the rent with no exemptions allowed – are we correct in this assessment? Is there any way we can minimise this at all? This is the only means of income we will leave behind.
Unfortunately the Australian rental income will be taxable here, and the interest on mortgage drawdown to fund a foreign investment cannot be claimed against the rental income.
Hi I work in west africa & am away for 200 days at a time. Do I still fall into the resident bracket & taxed as such on my earning
If you are living in Australia, then absences overseas for work will not necessarily affect your treatment/status as an Australian tax resident. You may need to look at any foreign tax imposts.
Hello,
Im an Australia citizen and spent 4 months working in Japan on a working holiday visa. I did not pay Australian tax, but I was subject to Japan’s income tax. I have heard that Australia has an arrangement with several foreign tax institutions where some foreign income tax may be refunded? I do not earn more than $18200 in a financial year so normally all my income tax is refunded- just wondering if my foreign income tax will be refunded because of Australia’s arrangement with foreign tax institutions?
Any foreign tax paid will not be refundable in Australia. It can give rise to a credit which can reduce Australian taxes, but such credits are not refundable. I am not aware of whether the taxes in Japan can be reclaimed from Japanese tax authorities.
Dear Brett,
I’m finding myself in a strange position and i can’t seem to find other people who’s been in my situation to share their experience.
I bought my main residence in Australia in 2008, i since then travelled to france and decided to stay and have been tax resident by french definition since 2012. I sold my house in australia in 2015 after feeling more settled in France and claimed the 6 year absence rule in Australia. At the time a few advisors (french chartered accoutants and notary) said to me that France doesn’t tax capital gains in australia and i didn’t need to declare it in France.
Now apparently I spoke to another “expert” who claims I needed to declare the sale and it would have been treated as my second home in France and therefore i would owe french tax on the sale of my home in Australia..
Their logic is that article 13 of the tax treaty allows for capital gains to be taxed only in Australia but Article 23 which deals with the elimination of double tax allows france to tax you on your worldwide income (including those only taxed in aust) and would in return allow a tax credit for the tax owed in australia. But since i didn’t pay any tax in Australia, there is no credit.
So now i’m trapped into paying france for a sale of my home at a much higher rate…even though it was considered my home in Australia? so I am not protected by the 6 year rule?
If this is the case, I feel like the ATO should warn departing residents about this as there is absolute no mention of this situation on the ATO website or in the tax treaties…I would have never sold my apartment had i known!
Do you have any opinion on this or have you had previous clients in the same situation?
thank you
Annabel
This sounds like a tough issue faced in France. I guess the ATO are only concerned about Australian taxes. The pending changes here for non-residents being denied the CGT exemption despite being a former home will increase the tax issues for international relocations.
Hello everyone,
I just have a question please. I have worked in Switzerland for 4 years as a non resident. The day I return to Australia and become a resident again will I be taxed on the money that I saved and may be potentially be bringing back to Australia? Thank you for your comments J.
Hi Jerome, provided that you were a non-resident of Australia, then on resuming your Australian residency there will not be tax on the value of your savings. You will however need to declare all investment earnings from the time of your return to Australia.
Brett
Apologies if these were answered elsewhere.
How does being a non-resident affect superannuation if you currently have an industry superfund but move indefinitely to another country?
And what happens if you decide 30-50 years down the track to return to Australia? Are there tax-related fees involved?
There is no tax issue in Australia of remaining in an industry fund, nor returning to Australia. There are special rules for departing foreigners, but not Australian residents.
My husband left Australia in 1995 and living in Sri Lanka His passport is expired and If he renew his passport will he have to pay tax He does not have any property but has investments in share market and has not returned to Australia since 1995
Holding an Australian passport doesn’t affect tax in Australia. Tax is determined by tax residency status, as described in the article. Investments into the share market by a non-resident will not cause tax in Australia (unless they were owned prior to departure and deferral of the CGT event was elected).
Hi Brett,
My wife and I are senior citizens holding Australian and Brazilian citizenship. In 1997, we moved permanently to Brazil (having sold our home in AU and cashed fully our respective supers). Since then, we are Australian tax non-residents. I have been working in Brazil for the past 21 years and soon I am going to retire. We are planning returning permanently to AU, and transferring the funds of our assets (sale of real estate and cashing of investments) to purchase a home and live off for the rest of our lives! Also, I am getting a pension for life from the Brazilian government, which will be taxed in Brazil. As I understand there is no Double Tax Treaty between Australia and Brazil.
– Will we have to pay tax in AU on the transferred funds?
– Since we will be Australian tax residents again, will the Brazilian pension be taxed by the ATO?
Thanks in advance and looking forward to hearing your reply.
Cheers,
Carlos
Hi Carlos,
On becoming an Australian tax resident you will be subjected to Australian tax on worldwide income (including investment income/gains and foreign pensions). There will be Australian tax payable on the Brazilian government pension (but if you have personally made contributions to building up a pension account there may be reductions). If there is tax paid in Brazil then the Australian tax would be reduced by a foreign tax offset.
If you hold investments or foreign currency at the time of becoming an Australian tax resident, then future capital gains tax or foreign exchange gains may be subjected to tax (as compared to values at the time of commencing residency, assuming they were acquired whilst you were non-resident).
These are general comments. To provide advice on your specific situation we would need full details and be engaged to advise …
Regards
Brett
Hi Brett, I have a question regarding selling my house in Australia. I am Australian citizen but I have been living in New Zealand since 2014. I am planning to sell my house in Melbourne which I purchased in 2009 and was primary place of residence before moving to NZ. I lived in the house from 2009 to 2014 and it is rented out since then. I read in your blog and also on ATO website, that foreign and temporary tax residents who already hold property on 9th May 2017 will be able to claim the main residence CGT exemption until 30th June 2019. If you can let me know that I am eligible for capital gain tax exemption or not if I sell house before June 2019 that will be much appreciated. Thanks.
Hi Mike, You are correct to the extent that non-residents selling Australian property can still claim the main residence CGT exemption up until 30 June 2019. To get the exemption under the current law, you would also need to fall within the six year absence rule, which allows you to treat the Melbourne house as your main residence for up to six years across an overseas absence while you are renting it out. Luckily, you only moved out in 2014, so it appears you’ll come within the six year rule if you sell before 2019. Please note that the removal of the main residence exemption for non-residents is currently still yet to be passed into law.
Hi Brett
My spouse and I are moving permanently to France in January 2019. We own several properties in Sydney and intend to live on the rental income they generate. Will this income then be taxed by the French government but we will be exempt from the ATO as we will be non residents in Australia?
Also if we sell our Sydney home or an investment property before 6 years have elapsed since leaving Australia, what will be our CGT position with the ATO?
Thank you for your time taken in answering this.
Jonathan
Rental income will always be subjected to tax in Australia, and you will need to continue lodging tax returns to report this. When the French tax this income they should allow a tax credit for Australian taxes paid.
The changes that are coming will eliminate exemptions for sales made by non-residents after 30 June 2019 of their former homes. You should watch this space to see if the law comes through as drafted/announced. It is currently before the Senate.
I work in PNG and pay PNG income tax to the PNG government, but I am an Australian resident for Australian tax purposes. The tax rate in PNG is higher than in Australia and as I understand it, Australia has a tax treaty with PNG. Does this mean it is possible that I will receive a refund from the ATO because I paid “too much” tax in PNG?
Kind regards
Kobus
Unfortunately not. The tax paid in PNG would be available as a credit against Australian tax, but that is a non-refundable credit. So the PNG tax can cancel out Australian tax, but would not generate a refund in Australia.
Regards
Brett
I worked on super yachts overseas going back 9 years ago. I declared myself a non resident for tax purposes and was overseas for best part of three years. I had a Lloyds bank account and was paid into that while overseas. Over the 3 years, I transferred back about $100,000 to my Aussie bank account. A year after I retired back, I was told the tax situation for Australian yachtied had changed. I hadn’t given it a second thought until now receiving a letter from Lloyds saying they need to register on their system which country I am a resident of. I haven’t used the Lloyds bank account for 9+ years. Is there anything to be concerned about?
If you were tax resident of UK or elsewhere overseas whilst earning income then there should be no problem. Since coming back to Australia you certainly should be declaring any interest income on the Lloyds bank account, and if over AU$50k in overseas assets there is a Yes/No question in your Australian tax returns to answer correctly.
Hi Brett,
I am moving to China this week for a 2 year job and getting paid into a Chinese account in RMB. I have 2 investment properties (both negatively geared) and was wondering a couple of things:
1. Can I be considered a foreign resident for taxation purposes?
2. I have made approx $2000 this financial year, and am about to move overseas for 2 years, will this income get taxed at 32.5 cents or within tax free threshhold?
Thanks for your help!
In response to your questions:
1. This will depend on the degree of permanency of the house/living quarters that you are living in China, and the extent of remaining connections with Australia.
2. In the year of changing tax residency, because you were resident for at least some time you will have access to some of the tax free threshold and the normal resident tax rates (so won’t suffer the 32.5% rate from first dollar).
Hi my husband and I have moved to Vauatu and rented our home out. He has notified the electoral roll, medicare etc. We will be here a minimum of 2 years. I believe one of the tests is how many times and for how long you return to Australia. I have an ailing mother and expect to go back regularly, not so him. Because of this we intend to have him as a non-resident for tax purposes and myself as a resident. The home is in joint names. Are we able to do this?
It can be difficult to argue different tax residency. Assuming you remain Australian citizens (domiciled in Australia) it will be necessary for your husband to have a fixed and “permanent” home in Vanuatu, as otherwise he could still be treated as an Australian tax resident. The facts will be all important, as will intentions and time frames.
Hi. My husband and I have sold everything we own and will depart Australia in 2019 to travel indefinitely, with no long term stay in any particular country. I earn money online from various sources, primarily online course that I’ve created, contractor work and other freelance type employment.
We have no plans to return to Australia within the 2 years specified. We do have a rental property in Australia.
As I understand it we will be non-residents for tax purposes, however given that we are in no fixed location, who do we pay tax to?
Generally where you are not establishing a permanent home elsewhere, you would stay as an Australian tax resident under the statutory tests, and therefore still pay tax in Australia.
Hi Brett,
I’ve been working in Oman for 10 years before I immigrated to Australia as a permanent resident last year. I have resigned from my job in Oman before moving to Australia and asked my former employer to hold my bonuses and end-of-service entitlements with them until I am well settled in Australia, because I didn’t want them to transfer it to my Omani bank account as I may not have no access to the account once I lose my Omani residence status.
They transferred the funds to my Australian bank account seven months after my arrival to Australia upon my request. This money is earned and was due before becoming a tax resident of Australia. Is this amount taxable in Australia?
There is specific exemption for foreign termination payments arising from overseas services whilst a non-resident. The question for normal wages is to determine the time of derivation of income – which is normally the time of payment of wages. Where your employment actually ceased before coming to Australia there would be grounds that the income is not taxable. You can expect that the ATO will know of the foreign money arriving and will likely seek explanation.
What if you have non Australia property (International shares) and leave Australia for a tax treaty country, establish tax residency and stay there for 6-12 months, then move to another country for 2 years that has a tax treaty with the first country but NOT Australia, and dispose of your non Australia property there. Does the ATO claim CGT on that sale?
On ceasing Australian tax residency, there is a CGT event unless electing to defer CGT until ultimate disposal. Some treaties can override that deferred CGT, but only if tax resident of such country at the time of disposal. If disposing whilst in a third country, the deferred CGT would be triggered. This can complex.
Thanks Brett. And what if you sell the property into a trust/company in the tax treaty country and the trust/company disposes of the property while a tax resident in the third country. Would the ATO claim the cgt on that if you dont return within 2-3 years?
The sale to company/trust would crystallise a CGT event. Should you re-establish tax residency in Australia there could be transferor trust or controlled foreign company issues to face. This is beyond the scope of discussion here.
Hi Brett,
Just rewording my previous question to remove some ambiguity and give more detail. I hope you can comment.
I’m an Australian citizen originally from Scotland (dual national) and currently own a house in Sydney, as my primary/only residence. My wife and I have owned it for the last 8 years but have lived in Australia for 24 years all told. Sadly, my father was recently diagnosed with Alzheimer’s back in Scotland. My boss (in North Carlonia) is happy for me to work remotely from Scotland as it is a better time zone for him and my employer is a large global multinational. I am an Australian employee working for their St. Leonards office. Initially I’d like to spend alternate 2 months caring for my father but may need, eventually, to spend more than 6 months in a given year caring for him. I’m confused by the 183 day rule or whether it applies.
Is my wish to care for my dad possible without having to give up my Australian job and can you explain any tax implications? Any thoughts hugely appreciated.
Hi Doug, Sorry to hear about your father. Your tax question is complicated in that it will depend on a few facts regarding your connections to Scotland, whether your wife will accompany you or stay in the your house in Australia, and whether your wages become taxable in Scotland. You will need to contact me direct and we can provide advice. Brett
Hi Brett,
I bought a beat up old place in NSW in 2002. I spent the next 10 years and a small fortune renervating the place while living in the house most of that time and working in Aus.
I retired in May 2014 then left Aus in Sept. 2014 to live in Asia and im still there and dont plan to live in Aus again. The house has been rented during my absence.
I understand Ive got until 30 June 2019 to sign a contract of sale on the house to avoid GST as a resident living overseas.(been o/s for 4 years now) or go back to Aus and reclaim Australian ID for GST purposes.
Am i right or have i missed something with this proposed legislation.
Appreciate your comment.
You are correct in relation to CGT. The ability to claim exemption for sales after 30 June 2019 will be determined by residency status on the day of sale under the changed laws. If you come back and re-establish Australian tax residency before sale, then access to the exemption would be restored. Perhaps parliament will fix this before it passes into law?
Hi Brett
Looking for some advice please. I’ve just moved with y family to the UK from Aus (November 17). We have rented out our home in Sydney since then and are now contemplating selling. Having now learned of new tax laws I believe we have until June 19 before we are hit with capital gains charges. My question is at what point do we loose our Australian residency for tax purposes and is there anyway we can hold onto this while earning in the uk? We have still to do our 2018 tax return and unsure how we should declare our uk earnings incase this affects our tax residency. Should I contact you directly to discuss? Thank you!
I agree that this would be best to discuss directly. You can contact me at bcox@accrusyd.com.au
Hi, I plan on working in Bahrain for at least 3 years and don’t really know if I will return to Australia or not at this stage. Will I need to pay AU tax on salary earned while I’m in Bahrain or would I be exempt? I don’t have any fixed assets in AU.
Hi Claire – provided that you are establishing a fixed home in Bahrain and don’t continually move around, then you should be able to demonstrate that you have a permanent place of abode there such that you cease to be an Australian tax resident. That means that salary in Bahrain would not be taxable in Australia, provided you are living in Bahrain. To provide advice we would need full details on a direct engagement. Regards Brett
When is it likely to pass into law.
We await the Senate decision on whether they will pass the law as it stands (no progress since 19 March 2018), or perhaps improve on it.
Hi, my wife and I have moved to Dubai, and plan on selling our family home in Sydney which is currently being rented.
We are planning to purchase another property in Sydney, my question is since we are non residents for taxation purposes, are we liable for extra stamp duty costs on our new purchase? I am unclear on the ruling on foreigner investors vs non- residents for taxation purposes.
Thanks
Hi Blake – the extra stamp duty is imposed on “foreign persons”. Australian citizens, regardless of where they live, will not be “foreign persons” and hence won’t suffer the extra duty. Your income tax status as a non-resident is not relevant for stamp duty purposes.
Regards
Brett
Hello, Thank you for your information. I have dual EU and Australian citizenship, I was born & resided in Australia for most of my life. I’ve been living 5 years overseas, but I only started working overseas in April 2016, after 2.5 years of living overseas without work. My income after tax is less than the tax free threshold, I haven’t earned over $18000aus per year. I am living here indefinitely, and I haven’t even returned to Australia to visit within this time. So am I required or exempt to do Australian tax returns for my overseas income?
If you are living in Europe, and have an established home there, then you will not be regarded as an Australian tax resident – thereby won’t be taxable on foreign earnings in Australia. You may need to notify the ATO that you are non-resident and have no Australian earnings so they can flag that no tax return is required.
I have been living in Mexico for 3 years. I wasn’t working for the first year. I returned to Aus for a holiday in the second year (and worked for a month) so I argued/submitted for that tax report that I was a resident of Australia still. I am working more now so next year I want to argue that I am a non-resident. Will I have trouble doing so? If I am a claiming that I am non-resident (next year) do I have to lodge a tax return/declare my world wide earnings at all? Thanks!
Tax residency is a mix of factors. You can try the ATO tool at https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=DORSLA&anchor=DORSLA/questions#DORSLA/questions. For specific guidance we would need to obtain details and build specific advice for your circumstances.
Hi Brett, we are returning to the UK permanently in November (we are UK and Australian citizens) and will have worked 4 months in Australia. Do we file tax returns from the UK? do we declare ourselves non resident for tax purpose for the whole year? confused….
Yes – you can file from the UK. There is a specific question in the tax return to enter the date of ceasing tax residency in Australia.
Hi Brett, Thank you for all this helpful information. I’m an Australian citizen and currently considering a job offer in the US. We live in our house which if we rent it out, the mortgage would be heavily negative gearing. We’d still need to file income tax with ATO but would the negative gearing rule apply to our US tax? Or we’d have to pay income tax on our rental revenue regardless of our mortgage? Many thanks in advance
Hi En. Your question is centred on US tax and whether mortgage interest is deducted against foreign rental income under their system. I would expect so, but that is a more a question for US tax advisers. And there is both Federal and State tax calculations to consider. There is also foreign currency treatment of the mortgage loan to consider. Regards Brett
Hi Brett,
I am an Australian resident working permanently in Australia. However, I have inherited a mortgage free property in Malaysia which is generating rental income. I am intending to invest in Malaysia based on the rental income. Do I get taxed in Malaysia or Australia for the rental income?
Hi Jane. I would expect rental income from a property in Malaysia would be subject to tax in Malaysia. The important consideration as to whether there is also tax in Australia on this rent, is whether you are a tax resident of Australia? You have described yourself as an Australian resident – you need to look at the tax rules not just whether you hold permanent residency in Australia. If you are tax resident of both countries, then the double tax treaty will need to be considered.
Regards, Brett
Good morning.
I am an Australian citizen and will be a resident for tax purposes. I am working for a UK company doing contract work in various locations around the world. I get paid into my Australian bank account. I was wondering do I have to claim tax in the countries I have performed work or just claim it via the ATO.
If you are an employee, work that is performed in outside Australia can also be subject to tax in those foreign countries dependent on their particular tax rules. If they are countries which have a tax treaty with Australia, then there may be protection from you being taxed in those countries under the treaty provided you are there less than 183 days of their tax year. Further, if your employer has a permanent establishment in those countries then that is also a factor. Sorry – I can’t give an all encompassing answer.
Hi,
I am a Singaporean and Australian PR. My wife and I have been employed full time and living in Australia since 2010.
I’ve got a job offer in Singapore and possibly starting the job sometime in mid Jan 2019. We plan to move in Dec or Jan after I resign from my Australian employment.
1) How will my australian income (from July 2018 to December 2018) be taxed?
2) How will my income in singapore (from Jan 2019 onwards) be taxed? I obviously have to pay tax in Singapore, but what about tax in Australia?
3) If for some reason we decide to return, say… in March 2020. What implications will this have?
Thanks!
Please review other responses as to income before/after relocation. The question as to whether you cease residency is based on intentions (as supported by actions). If circumstances/intentions change – than should not impact (unless hindsight shows that you did not intend to relocate permanently back to Singapore).
Hi,
I’m an Australian Citizen and a resident for tax purposes. I’m considering a job offer in Dubai, where I would commence work in January 2019 for at least 2.5 years. I have no property in Australia and will sell my car. I am not married and have no children here in Australia. I’m looking to purchase a property in Dubai. I will have earned some money in Australia from Jul 2018 – Dec 2018. And then after moving to Dubai will earn money in Dubai from Jan 2019 – Jun 2019 and beyond.
1. Will I be taxed in Australia for my entire earnings made in Australia and Dubai for the 2018/2019 tax year? Or only taxed on my Australian earnings?
2. You may provide the answer to this with the above question – but in any case – Will I be able to declare I am a non-resident? And therefore not have to lodge an Australian tax return for any earnings made in Dubai from Jan 2018 onwards?
Thanks for your assistance
You should only be taxed on worldwide income for the period up to departing Australia and ceasing tax residency, and thereafter only Australian sourced income is taxable in Australia. There will be a question in the 2018/19 tax return enabling you to advise the ATO of your cessation as a tax resident. If you cannot demonstrate that you have a permanent home in Dubai then you could still have tax residency in Australia – so that will be an important aspect.
Hi – I found your post after trying to figure out how to contact the ATO from overseas, but thought maybe I could ask here. My husband is an Australian citizen by birth, I’m American, but had been a PR of Australia while we lived there for 18 months in 2010/2011, but we have since moved back to the US at the end of 2011. We do not own anything in Australia, we don’t even have a bank account there. We have a home and a business in the US. Initially, I filed our taxes because I thought we were supposed to. In 2015, I think I found somewhere that said we didn’t need to, so I stopped. I’ve now gotten worried that we were supposed to file, or file something saying we aren’t required to. I’m just trying to stay on top of the right thing to do. Is there anything I do need to be filing? It sounds like from your article that we indeed do not need to be filing as we have no assets in Australia, and all of our assets and our children are with us in the US. While I dearly LOVE and miss Australia terribly, I don’t foresee us being able to move back in the near future. Any advice would be wonderful, or if you happen to know an email address for the ATO, I can’t seem to find one and can’t call internationally.
In the tax return which covered the year that you ceased being a tax resident, there is a question enabling a date to be entered to advise the ATO of the residency cessation. The return can be marked as a final return. Alternatively you can lodge a “further return not necessary” or FRNN. The ATO generally don’t accept emails, so you will need to call them or search their website for online services (registration required). Alternatively – you could revert to writing a letter to the ATO, see https://www.ato.gov.au/About-ATO/contact-us/write-to-us/
Hi Brett,
My husband and I are moving overseas indefinitely since my husband has accepted a permanent full time job. We will rent out our properties here in Australia. Recently my current Australian employer expressed interest to continue my employment which means working remotely overseas (home based). I haven’t accepted the offer as I’m unsure if that would affect my non resident status. They do not have a business entity overseas and have not figured out how they would pay me (I.e. Whether to keep paying me in my AU account or to the new overseas bank account). Will I still be classified as non resident if I continue to work for them?
Thanks,
millie
Hi Millie
The location of your employer will not affect your residency status (unless you are relocating to perform the work). Where you are non-resident and are performing work overseas for an Australian employer, the employer would not withhold Australian taxes but rather would need to register as a foreign employer and comply with rules in your country (including withholding requirements).
Regards
Brett
Hi Brett,
My husband and I have recently moved to Canada on a 2 year working visa, but are still classified as Australian tax residents. We have 2 investment properties in Australia that are negatively geared. Will we be eligible for the tax refund on our Australian Tax returns, or will we have to wait till we earn Australian income to receive the refunds?
Thanks!
If you are Australian tax residents, then your Canadian income will need to be included in your Australian tax returns (together with credits for Canadian tax paid). Your negative rental income will be applied/absorbed against the foreign income without generating Australian tax refunds, and to that extent will not be available in the future.
Hi Brett, what an informative blog article, Thank you for sharing! I have a unique question I have not seen presented in the above responses and hoping you can help. I am an Australian Citizen and recently accepted a permanent job in Indonesia. I have sold all assets in Australia, and all that remains is my furniture in long-term storage, my superannuation, an investment account and bank account. I have removed my name from the electoral role and closed all other accounts. According to the ATO residency test I’m considered a non-resident for tax purposes. The company I work for allows for a proportion of my salary (after tax) to be split between my local Indonesian account and Australian account. [I have decided this is a good idea so don’t loose out with terrible rates and fees when I transfer IDR to AUD]. Given I’m a non-resident for tax purposes, will a regular monthly deposits into my Au bank account have tax implications for me?
Many thanks
Luke
Hi Luke. Foreign sourced income of a non-resident is not taxable in Australia. The deposits to Australian bank account will not be taxable. The deciding issue comes down to correct classification as a resident v non-resident.
Hi, I come to the UK after being made redundant to spend some time with my mother, my mothers is suffering from dementia ans her health is getting worse and I have now been here 18 months, I have been putting my tax return in Australia a I decided to rent my unit, I also get a small pension. I do not work in the UK at all and survive on the pension and rental income. My home amd my intention is to still live in Australia. I have just got caught up in looking after my Mum. Will I now be treated at a non- resident in Australia for tax purposes? How long each year do I need to spend in Australia to avoid this. I just find it difficult to leave my mother.
If you are domiciled in Australia, and have not established a permanent home in the UK, then you would still be an Australian tax resident even if you spend no time in Australia. However the UK may consider you tax resident there, and the tax treaty will become relevant.
Hi Brett,
I will soon be starting employment in Macau for an extended period and considered a non-resident for tax purposes. My wife we be joining me and attached to my working Visa in Macau. She is currently a freelance designer in Australia and intends to continue working once we arrive (Australian clients only) with the intention of using her Australian ABN and paying the relevant taxes in Australia.
Will this have any impact on my non-resident status and result in paying Australian taxes on my Macau wage?
Many thanks.
Having your wife relocate with you is consistent with being a non-resident. If she runs a business overseas that would not be adverse, and it may not be taxable in Australia unless there is a permanent establishment here?
I want to understand my tax situation, if I relocate to Hong Kong. Would I be considered Australian or foreign resident for tax purposes and required to file taxes in Australia?
Ask:
1. I would like to become non-resident in Australia during my period in Hong Kong. I would not want to file taxes in Australia during my stay in Hong Kong.
2. I wish to retire in Australia.
3. I wish to visit Australia once a year if we keep our house and car. Or twice a year if my family doesn’t join me in Hong Kong.
Current Situation:
1. I have a family in Australia {Wife, Daughter (minor)}.
2. We are all Australian Citizens.
3. I am building a new house in Canberra which may be finished approx. by May 2019. We have not lived in this house ever. I will be paying mortgage on this house.
4. I own a car and not planning to sell unless required for any tax reasons.
5. Me or my wife have never worked for Australian govt. agency/organisation.
I have an offer with Hong Kong registered private organisation and plan to join them in December 2018. I plan to work and live in Hong Kong for 3-5 years.
My family could join me later (3-6 months from December 2018). They may plan not to join me or come back to Australia if they find difficult to integrate in Hong Kong.
Question:
1. Would I be considered Australian resident and required to file taxes in Australia,
a. if my family stays in Australia and live in house we own?
b. if my family joins me (3-6 months later) in Hong Kong and stays with me for 3 years or more? However, we keep our house but not rent it and leave our car in garage in Australia?
c. if my family joins me in Hong Kong? However, we rent our house but keep our car in the garage.
d. if my family joins me in Hong Kong? However, we sell our house and car.
2. Would I be required to pay any taxes on savings (money saved) in Hong Kong and plan to bring to Australia. Assume relocation back to Australia in 3-5 year).
There are a lot of specific issues in your question, which is beyond scope here.
Very informative article, thank you. I want to clarify how the removal of the CGT exemption rule applies to my case as a non-resident.
I bought my land and built a house 4 years ago. 3 years ago, I moved to Indonesia indefinitely. I have left the house vacant. It is my only property and I lived in it before I left Australia.
1. If I returned to Australia first, for say a year, then sold the property, would the CGT be applied as per normal, and be calculated pro-rata to the time I rented it out (in my case 0)?
2. If the above is true, it seems that only the TIMING of the sale is important. It is irrelevant what portion of time for which I owned the property I spent as a non-resident. Am I correct in my understanding?
3. After I moved to Indonesia, I have bought and held some American stocks. I used funds in my Australian bank account and used an international broker which also has an office in Australia (IG). Am I liable to pay any CGT if I sell it now, or later when I am an Aus. resident again?
Thank you. I greatly appreciate your time.
1. Yes, provided you are a tax resident at time of sale
2. Correct timing of sale will be the important factor
3. If you resume tax residency in Australia there will be CGT calculated since time of resumption.
Hi Brett,
Your article was a great source of information. I am trying to obtain clarification on what my tax status for Aust will be and how I ensure I am classified a non tax resident. I am accepting a 3 year contract in Singapore and my husband and I will both live there. He will attempt to gain employment there under my visa, he will take long service leave (10 months) and the rest leave without pay from his govt job. If we leave my 2 children 21 and 19 in our family home and rent out the downstairs granny flat does that ‘count’ as renting out the family home or do I need to move the kids out and rent the whole house out? Many thanks Kelly
If your children occupy the house under a lease, rather than as family members, and no part of the house is kept or set aside for you, then it would count as being let. The factual scenario will determine the outcome. If the children keep the house in mothballs for you, then the house will be being maintained for you.
Hi Brett,
Thanks for all the helpful info. I was not able to find a similar case, so I’m hoping you can help me clarify.
I’m an Australian citizen who now hold dual citizenship in the US. I have a house in Melbourne, it is not rented out because my parents live there to help save them some money as pensioners; it is the address on my electoral roll (I still vote overseas) and I believe the phone bill is still in my name. I have lived overseas for 7 years now with short returns here and there. Based on ATO’s definition of “main residence”, I meet most of them:
— you and your family live in it
— your personal belongings are in it
— it’s your address on the electoral roll,
— services such as gas and power are connected.
My question is whether I can indeed continue to claim this as my “main residence” when the day comes where I will sell the house.
Thank you.
The issue of the Melbourne house being your main residence will only be relevant (under pending rule changes) if you are a tax resident at the time of sale. If you are resident, or the rules don’t follow the announced change, then issue is whether the house amounts to being your main residence … either actually or by virtue of the extension for temporary absence (which has no time limit where the home is not rented).
Thank you Brett. Since the change if passed will not take effect until July 1, 2019, is there a way to gift/transfer the title without incurring CGT to my parents?
Transferring property can be done, but only where the disposal is real. There will he stamp duty payable by your parents.
I have been offered a job in Singapore from a friend at a moderate salary. I inherited a few million from my parents. If i transferred the money to Singapore, could I take advantage of no CGT and pay no tax on foreign sourced income on those millions? (I understand I would pay Singapore tax on my local income). If after 3 years I doubled my money, could I bring all that money back into Australia tax free? I am an Australia citizen.
If you cease being an Australian tax resident, then tax in Aust on investment earnings changes as non-resident withholding tax applies and future investments may be outside CGT. Beware that you can be treated as disposing of existing investment on date of ceasing residency. Lots to consider. The facts are important and you should seek specific advice.
Hi, i live overseas in the UK and i earn money in the UK and Australia however, i do earn more from Australia. I’m just wondering how i would be taxed on my incomes?
This will depend on the type of income and where it is sourced, and also on your tax residency both in Aust and UK.
I have PR and I have been in Australia for 5 month already with my eldest daughter who attends primary school. My wife and youngest are still in the Philippines and will be joining us this month. Unfortunately, I have hard time getting work on my field here in Australia, so I am planning to continue working in my home country Feb next year. My wife and two kids will continue to reside here around Melbourne area. My question is: Will I be paying PH and AU tax at the same time/realtime? If this is the case then there might be little to nothing that will be left for us to sustain our family’s need? Will there be any tax options available for us to mitigate the double taxation? Thanks in advance!
There is a double tax agreement between Australia and the Phillipines, which is to prevent paying full taxes in both countries … as that would indeed be drastic.
Hello,
How about if you are an Australian Citizen moving to Europe for 2 years +, no assets in Australia and continue to work and earn money online as an employee of an Australian business as a subcontractor?
As an Australian citizen, you would need to establish a permanent home (fixed address) overseas. If you are an employee, then your employer should be registered as an employer and withholding tax in the foreign country. So the issues are about both your residency status and your employment status.
Brett,
I am moving to Japan Jan 2019 and will be residing, working and paying tax there for a year. I will live in Japan for 48 weeks and return to Australia to visit children 4 weeks total. The next four to five years I will be living and working overseas and will not be returning to Australia during that time to live, only to visit children (all grown) on holiday throughout the year. Currently my spouse and I reside in property we own in family trust, she will remain living in it for the next year until she joins me overseas 2020, at that time we will rent our property out. We also have SMSF in trust account in Australia with two of our sons as joint trustees with her and I. Will I need to pay tax in Australia or how do I avoid paying additional Australian tax if possible.
If you are maintaining a home and dependants in Australia, then you could well still be considered an Australian tax resident. There are multiple issues in your circumstances and I recommend that you seek specific advice on this.
Hi,
I am an Australian resident working in Fiji. I have a 3 year work permit in Fiji and have no property in Australia. I live fulltime in Fiji with one a month holiday in Australia per year. I am paid by a Fijian company but in Australian dollars. I pay tax in Fiji and receive a statement for this. I also have a share portfolio based in Australia (Colonial First State). Will I be expected to pay tax in Australia or is this covered by the income tax I pay in Fiji?
Thank you
You will be required to pay tax in Australia unless it is clear that you have ceased being a tax resident in Australia. That requires looking at your connections with Australia, as compared to Fiji. When you travel to Australia, is a home being maintained for you? Or are you staying in hotels? What sort of accomodation do you have in Fiji? There are a number of factors to consider.
My mother is an Australian Citizen, and tax resident in Australia. My wife I have established a domocile overseas, and are both non-resident for tax purposes. My mother who is elderly has spent over 5 years with us and is becoming increasingly dependent on us. It is likely she will spend even more time with us. Although she seldom visits Australia now, she continues to maintain a home in Australia (ie unrented with a friend minding it), with electricity and water in her name etc, holds Australian private Health cover, and her only economic activity, assets, and sources of income are in Australia. Should the proposed changes to the CGT go ahead, is it possible (due to the lack of physical presence in Australia) she be deemed a foreigner at some point and loose he CGT exemption.
There is a risk. The law is yet to be legislated .. and maybe with the looming federal election it might get some air play as to the harshness. Residency is normally based on intent, and having the home which she intends to return to is compelling. Should she stay overseas, and then you later have to deal with the house then the tax is still a problem.
Hi Brett,
I’ll be moving to China to work for a Chinese company soon. I have no definite plans to come back and my only assets in Aus would be my savings in a high interest savings account. What do I need to do to declare to the ato that I am a non-resident for tax purposes? Since I would need to declare my income since I have HELP debt, is my situation complicated enough to warrant finding an accountant? Thanks
With a HELP debt there is a requirement for non-residents to declare worldwide income to the ATO each year, and advise the ATO of intended time abroad. Bank account interest would be dealt with by withholding tax and not need to be included in a tax return as such. Your choice to use an accountant depends on how much you wish to engage assistance.
Hi Brett
I am considering a role based in Singapore, my family will stay in Australia in the family home, I will maintain motor vehicles in my name etc. I am assuming I will be an Australian resident for tax purposes.
Currently I have several negatively geared properties in Australia. If I am an Australian Tax resident, will my worldwide income tax be available to be used for negative gearing purposes as my current Australian income is?
If you remain an Australian tax resident (which is likely), then yes your worldwide income will be reported in your tax return and negative gearing will be available (subject to law changes on negative gearing if government changes).
Hi, I am relocating to Sinagpore with my wife and kids as my wife has been offered a role there on a 3 year contract. I will be working remotely for my existing Australian based employer who will continure to deposit my salary into my Aus bank account. Will this income be taxed in Australia or Singapore? Thanks.
If you update your residency on TFN declaration and place of employment, then Australian tax should not be necessary. But not sure as to Singapore’s tax rules. And whether your employer has to deal with having an employee in Singapore. I assume you are Singapore tax residents, and have no home maintained in Australia…
Hi Brett
Very informative article, and thanks for responding to all the questions!
I have been working overseas for the past 6 years and think I satisfy the non-resident criteria. You have indicated above that income during the period that you are considered a non-resident does not need to be reported. Is this still the case if you have a HECS debt?
Thanks
Hi Kay, there are new rules from 1 July 2017 which invoke HECS repayments based on foreign incomes, even though the income is not taxable in Australia. There is now a requirement for non-residents with a HECS debt to report worldwide income to the ATO each year.
I had 2 questions, I hope someone can help:
I’m an Australian citizen, and have been living in Asia for 6 years with family here or rented premises. I’ve visited Australia 4 times since leaving for a total of a couple of months, both to see family and as part of my Masters degree. I do intend to eventually move back to Australia. Would I be considered an Australian resident for tax purposes (I still have a registered address – relative’s house and a bank account there).
I also have been offered a 12-month contract by the Australian entity of an international charity (as they dont have an Asian entity yet)- I would have to be a contractor and invoice them monthly. They would like to pay into my Australian account. I’ve read on the ATO website that Australians abroad working for charitable purposes may not have to pay tax- any guidance as to specific guidelines for this, or how I can check if this would apply to me?
Your Australian tax residency will depend on your type of presence overseas and status in the foreign country, type of home in foreign country, connections to Australia, etc. It is a multi factor approach.
Australians working on “overseas aid projects” can be tax exempt in Australia. But that depends on the precise circumstance if the charity and the project that you are working on.
My wife and I are soon (mid Feb) leaving for Germany, to work there for 2 years. At what date does our residency status change? Day of departure (i.e. 15 Feb), or start of new Financial year in AU (1 July) or Germany (1 January)? Also, we will earn rental income in Australia and salary in Germany. Where will we be taxed on what income? If AU rental is taxed here, at what rate or what scale will apply?
The departure for two years is right at the margin of residency v non-residency. Is there a definite plan? Will you be a German tax resident? Will you have a home/residence maintained only in Germany (with Australian property rented out)? Generally residency changes at point of departure. Rent is taxed at non-resident personal tax rate scales in years where you have no Australian days of tax residency.
Hi Brett,
My wife and I are moving permanently to France. I am a 50:50 partner in a consultancy business and I can work from anywhere in the World. My business here in Australia is structured to pay me a wage and will deposit the funds each month into my French bank account. I will cease to be a Australia resident for tax purposes, so will I get paid my gross wage into France and then pay tax there?
Would I still be able to have my super contribution deducted at source here or would it too be paid to me over in France?
We may also be keeping our house here as a rental. This rental income would be taxed here I presume and allowed for by treaty when we declare it in France?
Thanks Brett I appreciate your guidance on this.
Fenz
The treatment of the consultancy business depends on whether a partnership, company or trust; and whether the income is Australian sources or foreign sourced.
If you are non-resident, and all work is performed outside Australia, then there should be non tax on the salary and no superannuation. But the business may need to register as an employer in France. And there may be a taxable presence of the business in France.
You are correct that rental income will continue to be taxed in Australia, with relief granted for this in France.
Hi Brett,
I am an Australian citizen, moved to Malaysia in July 2018 for work, working for a local company. I intend to live in Malaysia for at least 5 years maybe more, I rent out my house in Australia bought in 2010, also I have shares bought through ANZ bank which I have held for 1 year, will there be any Australian CGT if I sell those shares now or in a years time? Also if I buy and sell shares using my Australian share trading platform while I live here in Malaysia will there be CGT in Australia?
Provided you can demonstrate that your home is in Malaysia, and not living in Australia as part of your lifestyle, then you would be able to be non-resident. On leaving Australia you could have paid up CGT on assets held, but if you didn’t then on subsequent sale you will need to report the CGT (beware also that access to 50% general discount is only for residency period). But shares bought and sold whilst living in Malaysia will be outside Australian tax system.
I am a 64 year old (65 in August) Australian citizen with a Filipino partner and 3 year old daughter. I have been offered a permanent job in Manila with an Australian company based there. I own nothing in Australia and have no intention of returning and have no ties. What taxes am I liable to pay!
If relocating with no intention to return, then you will be able to lodge a final tax return in Australia. You mention that you own nothing in Australia, but if you own foreign assets then on departure will need to look at how those assets will be treated.
We are planning to move permanently to Spain. My husband will have a PSS (defined benefit) pension while I will have a ” traditional” super-pension. His PSS is not totally tax free in Australia, but in its majority. Do you know if he will be liable for the same taxes on this “income” when we were to move to Spain as we do here or there will be a different tax treatment (i.e. the Spanish government not recognizing the lower taxes already paid?) What about for a “traditional” super-pension whose “income” is tax-free in Australia?
Hi Monica, there can be some significant surprises when relocating to a foreign country. Some countries will impose tax on Australian pensions and no regard is had to prior year taxes. You should certainly look into the Spanish tax rules.
Regards
Brett
I’m working in Hong Kong but my wife and children remain in Australia and so I remain an Australian tax resident. Can I get Hong Kong tax paid deducted from Australian tax levy? Also are there any other deductions I can seek based on having to pay additional accommodation and living expenses?
The Hong Kong tax will be a foreign tax credit in Australia (rather than a deduction). It may be that your employer can reimburse or package your additional costs? The ability to deduct such costs requires careful analysis of all facts.
Hi, I’m an Australian citizen living in the Uk ( 8 years ) and i would like to create a business in Australia, is this possible?
Yes, a business can be operated in Australia by a foreigner. This could be by incorporating a local company, or by operating as a foreign company in Australia (requires registration with ASIC) or as a foreign individual. There are lots of things to consider, and I recommend that you discuss this with an Australian adviser.