The most important question you need to ask yourself when you prepare to move overseas and become an Australian Expat is Am I an Australian resident for tax purposes or not? The answer will have some fundamental implications for your income tax obligations, but also on your investments.
A comparison of the tax implications for residents and non-residents from an Australian tax point of view are shown in the table below
|Australian Resident For Tax Purposes||Non-resident For Tax Purposes|
|Better tax rates||Higher tax, No tax free threshold|
|Taxed on global income||Taxed on Australian income|
|Pay Medicare levy||No Medicare levy|
|Capital gains tax on global assets||Capital Gains tax only on ‘real Australian property’, not shares|
For more information on the tax implications of your tax residency, download my Free Special Report – Tax Implications For Australians Working Abroad. Click on the button below.
Am I an Australian Resident For Tax Purposes?
The ATO uses a range of tests to ascertain whether you are an Australian resident for tax purposes
- The Resides Test : You are an Australian resident if you reside in Australia;
- The Domicile Test : You are an Australian resident if your permanent place of abode is in Australia ;
- The 183 Day Test : If you are actually present in Australia for more than half the income year (whether continuously or with breaks) you may be said to have a constructive residence in Australia;
- The Superannuation Test : You are an Australian resident if you are a Commonwealth government employee (or spouse) working at an Australian post overseas.
As an Australian expatriate, your residency status for Australian tax purposes very much depends on your individual circumstances, and there are no conclusive rules for determining your tax residency. As an Australian Expat, the domicile test will generally be the most relevant test. To avoid being considered an Australian resident for tax purposes you need to demonstrate that your permanent place of abode is outside Australia.
- The intended and actual length of stay in the overseas country
- Any intention to return to Australia at some definite time or travel to another country
- The establishment of a home outside Australia
- The abandonment of any residence in Australia
- The duration and continuity of the person’s presence in the overseas country; and
- The durability of association the person has with a particular place in Australia.
In most cases, should an Australian expatriate intend to reside outside of Australia for more than 2-3 years, establish a principal place of abode overseas, and rent out their home in Australia, it is likely the ATO will consider them as a non-resident for tax purposes. The outcome however is determined on a case by case basis, based on each individual’s personal circumstances. All relevant facts and circumstances need to be taken into account and no single factor is determinative.
You should seek professional advice in determining your tax residency. More information can be found at www.ato.gov.au. For more information on the implications of your tax residency please download my free ebook by entering your details below.
What issues have you faced in determining your tax residency, and answering the question – Am I an Australian resident for tax purposes? Share your experience…
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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.
Do you need tax planning advice from a company experienced in dealing with expat tax issues?
If you need to file an Australian tax return, or need tax planning advice as an Australian expat, contact GM Expat Tax using the form below. GM Expat Tax is a firm of accountants specialising in assisting Australian expats living and working around the world.
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