In this article we dispel some of the common financial myths that many Australians living overseas believe.
5 Financial Myths That Many Australians Living Overseas Believe
Myth 1: Australians living overseas don’t need to file a tax return in Australia
A common misconception of Australians living overseas is that just because they live overseas, they no longer need to file a tax return. While this might be true for many Australian expats, Australians living overseas still have an obligation to file a tax return in Australia if they have Australian sourced income or if they remain an Australian resident for tax purposes.
Also, if you need to file a tax return in Australia it does not necessarily mean you will need to pay tax. You can understand more of the rules for filing a tax return for Australian expats.
Myth 2 : I will lose my CGT exemption on our family home if I rent it out while living overseas
Whilst, generally if you rent your properties in Australia, then the property will attract capital gains tax (CGT) when you sell it, there is an exemption for your primary residence. When renting out your primary residence, you may elect it to continue to be your primary residence for CGT purposes for up to six years after you move out of the house (as long as you do not nominate an alternative primary residence for that period). What this means is that any additional capital gains that you make in the first six years after moving out of your house may not be subject to capital gains tax. (Update – The Australian Federal Government announced changes to CGT exemption rules in the 2017 Budget. These changes will mean that if you sell your primary residence you may lose the CGT exemption if you sell it while living overseas. There is some grandfathering of these changes until mid 2019. For more information on CGT exemption on your primary residence residence click here.
Myth 3 : I need to sell all my assets in Australia to be considered a non-resident for Australian tax purposes.
Many people are confused by what it takes to become a non-resident for Australian tax purposes. There are a number of tests that people need to satisfy to ensure they are not an Australian resident for tax purposes. There are however no conclusive rules and each person’s tax residency is determined on a case by case basis based on the specific facts of their personal situation.
However, for most people, they would not need to sell all their assets in Australia to be considered a non-resident for Australian tax purposes. Here are the tests you need to understand to determine whether you are an Australian resident for Australian taxation purposes.
Myth 4 : Australians living overseas don’t need to make repayments on their higher education loans (HECS / HELP) to the Australian government
As of 1 July 2017, Australians living overseas (who have a HECS / HELP debt) need to report their global income to the Australian Tax Office, irrespective of whether or not they are an Australian resident for tax purposes. This allows the Australian Tax Office to determine the person’s repayment obligations for that year. This article has the latest on HECS repayment obligations for Australian expats.
Myth 5 : The Australian Tax Office will never know how much I earn overseas if I don’t send the money back to Australia
With a significant number of tax information exchange agreements entered into between governments around the world as well as the adoption of automatic exchange of financial information means it will be increasingly difficult to hide any money from the governments which have a right to tax their income.
It should also be noted that all international money transfers to Australia and from Australia are also reported to the Australian government department AUSTRAC. And as this Australian expat found out, AUSTRAC shares this information with the Australian Tax Office.
Health Insurance & Medicare Myths
And while we are on the topic of expat myths there is much confusion about international health insurance and medicare implications for Australian expats.
You can find out more about the medicare implications for Australians living overseas here, and what you should know about expat health insurance here.
Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.
Are you considering taking out international health insurance? Be sure to read our article on 9 things you should know before taking out expat health insurance.