"Global" tax for Aussie expats from July 1

AdamN

AdamN

"Global" tax for Aussies from July 1

Couldn't find this posted anywhere on this board but thought it would interesting to share and discuss, particularly for expats like myself.

There hasn't been much noise made about it, but it seems that as part of tax reforms under the new Budget that was released this week, it was announced that the government wants to introduce a "global" tax for Aussies working abroad (similar to the Americans)

http://www.treasurer.gov.au/Display...09/066.htm&pageID=003&min=wms&Year=&DocType=0

http://www.treasury.gov.au/contentitem.asp?NavId=&ContentID=1538

http://smallbusiness.smh.com.au/starting/tax/tax:-tax-office-crackdown-615858056.html

http://www.taxpayer.com.au/media/news/20090512_budget.html

It's not exactly clear to me yet what the actual impact will be, but by personal view is that I don't agree with such a policy of expats paying more tax in Oz when we don't get access to tax-payer provided services such as health care, schooling, public transportation, infrastructure, etc.

What do others think?
 
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Yay.

I dont think its changed much, to my untrained brain, we are already taxed on global income.

The articals fail to mention that aussies over the 90day rule still have to pay local tax to have onshore tax considered "paid in full" or "partial credit"

I think it also depends on wether there are any double tax treaties inplace with the other country.

I would love to study taxlaw someday.
 
Looks like it only applies to resident australians who have worked part of the year overseas.
Full time expats would still pay no australian tax on overseas earnings (unlike US citizens).
 
yes, just looked at this for my CA tax exam on tuesday. essentially the current equation (if you are a resident and worked overseas for 91 days consecutively) works like this:

foreign income
- foreign tax
= take home pay

it will now work like:

foreign income
- australian tax
+ foreign tax (up to a max of australian tax, i.e. you cant make money from it)
= take home

make sense?

As stated above it only applies if you are a resident for tax purposes. non-residents (i.e. expats) will still not pay tax on foreign income.

Cheers

Ben
 
JoeExpat - Where does it say "who have worked part of the year overseas"

The Government has announced they will amend the general exemption available for Australians working overseas for over 90 consecutive days

If I'm an expat, am I not working overseas for over 90 consecutive days.
If there is no change, how are they getting a $675million boost in tax.

My reading of the press release is that this effectively brings Australians under the same rules as US citizens.

"Instead foreign employment income will generally become taxable and taxpayers will be entitled to a foreign income tax offset for foreign tax paid on the foreign employment income," the budget papers say.
Click to expand...
 
The key question in my mind is does it apply to Oz residents, non-residents or both? There seems to be a lot of confusion over who the ruling will apply to.

My interpretation is similar to investor888, but it's still not clear for me one way or the other. Clarity would be great as taxation is not my area of expertise :)
 
investor888 said:
The Government has announced they will amend the general exemption available for Australians working overseas for over 90 consecutive days

If I'm an expat, am I not working overseas for over 90 consecutive days.
If there is no change, how are they getting a $675million boost in tax.

My reading of the press release is that this effectively brings Australians under the same rules as US citizens.
Click to expand...

They should clarify their release to state Australian residents.
I highly doubt they would bring in such a draconian law, which would bring in a hell of a lot more than 675 million (if people complied to begin with, most wouldn't). How would you define liability anyway, through citizenship ? So the person that moved to Europe as a 5 year old, or a Brit that got a passport after living here 3 years before going home, has to start paying oz tax ?
 
Actually the guys above may be right. It should only impact residents for tax purposed, not expats living overseas.

"The proposed amendments will affect some individuals who are residents of Australia for income tax purposes. They will not affect all Australian citizens working outside Australia. That is, they will not affect Australian citizens who are not residents of Australia for tax purposes."

But who knows. This could be the first step for Rudd on his way to the US model. When they have 2 consecutive years of $50+ billion deficit, it may become appealing to start bringing in some more tax from expats as well.

Watch this space next budget.
 
I don't know why this didn't register the first time I read it earlier today (I was probably in a tizz at the thought of paying more tax :)) but this statement would seem to remove all doubt regarding who is affected by the new ruling:

The proposed amendments will affect some individuals who are residents of Australia for income tax purposes. They will not affect all Australian citizens working outside Australia. That is, they will not affect Australian citizens who are not residents of Australia for tax purposes

So it will only apply to Oz residents who receive income from abroad.

http://www.treasury.gov.au/contentitem.asp?NavId=&ContentID=1538
 
investor888 said:
Actually the guys above may be right. It should only impact residents for tax purposed, not expats living overseas.

"The proposed amendments will affect some individuals who are residents of Australia for income tax purposes. They will not affect all Australian citizens working outside Australia. That is, they will not affect Australian citizens who are not residents of Australia for tax purposes."

But who knows. This could be the first step for Rudd on his way to the US model. When they have 2 consecutive years of $50+ billion deficit, it may become appealing to start bringing in some more tax from expats as well.

Watch this space next budget.
Click to expand...
Beat me to it :)

I fear you are correct on your future prediction. Bring back Johnny :) At least under his rule there was no talk of scrapping negative gearing or taxing overseas income.
 
geeze guys i just sat the CA tax exam on tuesday, read my post :p

if you are a non-resident for tax purposes then you dont pay tax on foreign income anyway - but you pay more tax on what you do earn here.
 
So you sat the CA exam on Tuesday. The budget measure was released Tuesday night. It would be a bloody miracle if the budget changes were already in your exam :)

I still think that although it may be on resident Australians for tax purposes this time round, that eventually something (in future budgets), will be phased in to expats (like the US).
Think of it, it's a vote winner for Labor. More taxes, and you sell it as getting legit tax from all the "apparent" tax avoiding Australians working overseas (in Dubia, etc), who earn their money, pay tax at lower rates, and then bring the money back to compete for houses, etc with it against Australian who have payed their full tax. Sure vote winner for Labor from the low income earners.
 
investor888 said:
I still think that although it may be on resident Australians for tax purposes this time round, that eventually something (in future budgets), will be phased in to expats (like the US).
Think of it, it's a vote winner for Labor. More taxes, and you sell it as getting legit tax from all the "apparent" tax avoiding Australians working overseas (in Dubia, etc), who earn their money, pay tax at lower rates, and then bring the money back to compete for houses, etc with it against Australian who have payed their full tax. Sure vote winner for Labor from the low income earners.
Click to expand...
What would be the compliance requirements for such an approach though (I'm unsure how it works in the US)? Do they change the tax ruling from residents to citizens? If so under what criteria?

Wouldn't this just trigger an exodus of investment dollars out of Australia and drive down the property market? I assume it would have people considering to sell up and divert their capital to more attractive investment locations abroad. This way they'd have zero income in Oz, hence no reason to submit a tax return there.
 
AdamN said:
Wouldn't this just trigger an exodus of investment dollars out of Australia and drive down the property market? I assume it would have people considering to sell up and divert their capital to more attractive investment locations abroad. This way they'd have zero income in Oz, hence no reason to submit a tax return there.
Click to expand...
No, such a law would encompass all income, doesn't matter where it is, Australia or elsewhere. US citizens have to do a tax return for life, even if they haven't lived there 20 years and have no income there. This is a unique tax rule and will never happen in Australia.
 
I wonder what will happen if you retire and go travelling over seas for a couple of years all the while you have investment properties etc earning you income.


Will you be taxed on this income also while away on holiday and not currently working?
 
Depends on whether you are classified as a 'resident'. If you were retired and travelling with plans to return to Australia - your intent is not to cut ties with Australia (you wouldn't have sold your house, packed your belongins etc) but simply to take an extended holiday. You'd still be a resident and taxed on worlwide income.

WIth regards to the new budget measure - all they've done is repealed s 23AG which expempts income of residents working overseas for more than 91 consecutive days. Now you get a tax credit for the tax you paid on that income overseas (this credit however is subject to the limits in new Foriegn Income Tax Offset rules).
 
either way you will be taxed as everyone - resident and non-resident alike - gets taxed on australian earned income. the difference between a resident and non-resident, for income purposes, is to do with overseas income.
 
I know lots of expat mates will be giving up their Australian citizenship if they have to pay Aussie tax rates in Asia. Thats why they are there in the first place, to save tax! These steps exacebates the brain drain, not put a stop to it. But theres where Ruddys taking Australia, straight to Sherwood Forest in 09 and beyond. And us somersoftians are the easy targets to rob from. Sickening isn't it?
 
Dual Citizenship

How will the government handel such a situation if this goes ahead that it would apply to all citizens whether you are a resident or non resident?
 
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