Non resident of oz for tax purposes

[donkey]

I am based in Thailand travelling around the globe each yr but always return to the land of smiles to live. I travel back to Australia every yr or 2 to see family etc and don't work in Australia anymore. Since my circumstances qualify me (I've checked), I'm considering changing my status to that of a non-resident in Australia for tax purposes.

Obviously there are some benefits to doing this (e.g. not having to do annual tax returns). However, I'm trying to find out what other consequences, if any, follow on automatically from this change in status. For example do I lose my Medicare benefits or in the future will it mean I will not qualify for the old age pension (I'm only 45)?

I have savings in the bank earning me 4.6% PCM and an investment property that is positively geared.

I thought I'd check in here first for some first hand experiences before digging through various government websites.

Big question is... If I dont return to oz before 2 yrs of being away can the ATO automatically change my status from being one of a resident to a non resident for tax purposes. Its my understanding that this can only happen when the accountant does the tax return. Is this correct?

any opinions are appreciated.

 

[Terry_w]

Its not a matter of changing your status, it is a matter of the circumstances dictating your status.

 

[thesuperman]

Obviously there are some benefits to doing this (e.g. not having to do annual tax returns). However, I'm trying to find out what other consequences, if any, follow on automatically from this change in status. For example do I lose my Medicare benefits or in the future will it mean I will not qualify for the old age pension (I'm only 45)?

I think I read somewhere before that you do lose Medicare either if you stop paying the Medicare Levy or become a non-resident, but not sure on this exactly.

I'm curious to know what circumstances would make someone classed as a non-resident for tax purposes. Is it a certain time-frame not being in the country? Or do you declare that you aren't returning back to Oz after living overseas?

 

[Terry_w]

I think I read somewhere before that you do lose Medicare either if you stop paying the Medicare Levy or become a non-resident, but not sure on this exactly.

I'm curious to know what circumstances would make someone classed as a non-resident for tax purposes. Is it a certain time-frame not being in the country? Or do you declare that you aren't returning back to Oz after living overseas?

There are about 4 different tests which can be applied. Complex.

 

[Asheam]

Also note that you will still be taxed on any Australian property that you own even if you are a non-resident for tax purposes. Another thing you need to think of is that non-residents cannot claim the 50% CGT discount on gains past a certain date (May 2012?).

 

[DEC]

Did I read somewhere that non residents also get taxed on every dollar earned at the maximum rate?

 

[geoffw]

It used to be the case that if you declared yourself a non resident for tax purposes, and in later years you returned to Australia and lodged a tax return, you would get a "please explain" from the the office. I be surprised if that weren't still the case- ATO would have too much to gain by slapping somebody with several years of back tax.

I was away for just 2.5 years, but it was enough for them that I didn't have a house to return to in Australia, and that I had married overseas without the intention of returning to Australia.

 

[Terry_w]

Non residents for tax purposes don't get the tax free threshold. The tax rate starts at 32.5% and quickly increases.
see http://www.ato.gov.au/content/12333.htm
(down the page a bit)

Also consider the effect of becoming a non resident will have on any:
Companies you control
Trusts that you are a trustee or or control
Superannuation in general
SMSFs

 

[thesuperman]

Say you were going to live overseas for a few years & didn't want to go lose your "resident for tax purposes", I presume you would just keep doing tax returns so you don't lose this status?

 

[Terry_w]

Say you were going to live overseas for a few years & didn't want to go lose your "resident for tax purposes", I presume you would just keep doing tax returns so you don't lose this status?

Filing tax returns has no effect. Non residents with income here would also need to file.

What you would have to do is to make sure you met one or more of the tests to be a resident.

 

[BeYourOwnAgent]

I spoke to our accountant about this.

We will be relocating (permanently) to Thailand. We have 6 IP's, and also 2 separate trust structures.

I can't remember specifics, but our accountant said it would be financial suicide to be a non-resident for tax purposes.

Sorry I can't remember specifics, but I think it was centred around the company tax level and also personal tax gets jumped up immediately to the highest level (I could be wrong, so please don't quote me)

Short answer; talk to your accountant. I wouldn't rely on any other advice for something as important as this.

 

[Deuce]

I know a couple that had 7 IP's that live in bali and work on oilrigs getting paid in USD. They ended up selling all 7 IP's to invest in other countries due to tax reason so I presume it in favor of the ATO not the resident tax wise.

Please keep us updated on what you find out, I'm already living outside the country but work here enough to justify residency. I'm going to have to find someone to talk to about it as well since there is no point investing in my home country if I don't plan to live here.

 

[TingTong]

The main difference between being a resident and non-res is that non-res are taxed at 29% on the first $80,000 whereas residents have a sliding scale of NIL on the first $18,000, 19% on income between $18,000 and $37,000 and then 32.5% on income over $37,000 and up to $80,000. But bear in mind that as a resident all income worldwide must be declared in Oz and taxes paid on it. If you are a non res and have IP's o'seas then you don't need to declare or pay tax on any of this rental income to the ATO.

If you are selling an IP the actual capital gain is similar under both methods as you still do get the 50% discount on the capital gain but only up to the market value of the property at May 2012. Any gains made from that date are not entitled to the 50% discount and in today's market this pro rata amount probably won't be significant.

 

[geoffw]

If you do pay tax in Australia, you do get tax credit for the tax you've paid in that country- as long as that country has a tax treaty with Australia (unless that's changed).

So whichever country has the higher tax, you end up paying that.

 

[thesuperman]

I spoke to our accountant about this.

We will be relocating (permanently) to Thailand. We have 6 IP's, and also 2 separate trust structures.

I can't remember specifics, but our accountant said it would be financial suicide to be a non-resident for tax purposes.

Since you're relocating permanently, wouldn't you be a non-resident for tax purposes?

Please keep us updated on what you find out, I'm already living outside the country but work here enough to justify residency. I'm going to have to find someone to talk to about it as well since there is no point investing in my home country if I don't plan to live here.

How long do you need to work here to justify residency? Or could you just return back here also for a period of time & not work, then go back overseas?

 

[Deuce]

How long do you need to work here to justify residency? Or could you just return back here also for a period of time & not work, then go back overseas?

from MY understanding you just need to be here for 6 months of the year. I am in australia for 6.5 months of the year but I am a nomad FIFO worker. It really comes down to the ATO definition of "living" do I need a PPOR that I am in when not on my work site. I should really go talk to someone about my situation. I pay my taxes so you'd think it wouldn't be a problem but ya never know.

 

[HD_ACE]

http://www.ato.gov.au/individuals/content.aspx?doc=/content/36280.htm

http://www.ato.gov.au/individuals/content.aspx?doc=/content/36263.htm

http://www.ato.gov.au/individuals/content.aspx?doc=/content/64131.htm

http://www.ato.gov.au/taxprofessionals/content.aspx?doc=/content/64144.htm

quite complex

cheers

 

[Rob G.]

I'm considering changing my status to that of a non-resident in Australia for tax purposes.

No choice.

Either Australian law (4 tests) or more likely a double tax agreement with the other nation will decide.

The ATO website has insufficient information to discharge your responsibilities.

Cheers,

Rob

 

[robboat]

I was non resident for tax for a few years....

You will have issues with the 4 residency tests....because you are "resident" if you are sole director of Australian company, or if you own real estate in your own name.
The ATO is pretty merciless - and I had great advice from my accountants.
Keep good records of all income (separately) so if ATO come looking you can avoid issues.

Similar to other posters, I sold all property, appointed another director for my company and went to work overseas.
You need to have an address (not a PO Box) overseas and be offshore more than 183 days.
The "intention" was to not live permanently in Australia (this is important)

Things changed, now I am back and have property again...so no tax free income for a while....unless I go cash???....

I am soon to ask questions with property tax for complying developments....

 

[thesuperman]

You will have issues with the 4 residency tests....because you are "resident" if you are sole director of Australian company, or if you own real estate in your own name.

So as far as you are a sole director of an Australian company, you are considered an Australian resident, even if it was just a $2 company which was a trustee of a trust holding property? Would this also be the same if there were multiple Australian directors, but you were the only one living overseas?

What about if the real estate was in your personal name, but it was held in 3 people's personal names, and you were the only person overseas?