places to retire cheaply
- Thread starter investor2009
- Start date
Just wondering if anyone can give me the low down on how the ATO determines if you are an Australian resident for tax purposes or not. I couldn't find any specific guidelines on the ATO website and their questionnaire tool was inconclusive.
Say if I rent out my PPOR, how long can I live overseas before I am not longer an Australian resident for tax purposes?
Reason for my question is the ability to make use of the tax free thresholds.
Say if I rent out my PPOR, how long can I live overseas before I am not longer an Australian resident for tax purposes?
Reason for my question is the ability to make use of the tax free thresholds.
If you're renting out your house, the ATO may well determine that you remain a resident for tax purposes. But get specific advice, even a private binding ruling.
Also be aware that if you have an SMSF it may well become non compliant well before you become a non resident.
Also check the status of your medical cover - medjbank sjrcharge as well as private. You may well lose coverage.
Also be aware that if you have an SMSF it may well become non compliant well before you become a non resident.
Also check the status of your medical cover - medjbank sjrcharge as well as private. You may well lose coverage.
Dajackal
Unfortunatly there is no easy answer to your question. There is no set determination of residency (i.e. number of days in/out of country). Essentially you would need to prove that you have left Australia permanently.
This covers 2 main areas
1) your ties left in Australia.
Have you left your house (renting it out is usually ok, provided you meet other conditions). What did you do with your personal belongings. If you have put them into storage, you remain a resident. Have you kept somewhere to 'stay' in Australia. Ie did you move all your stuff to your parents house, and have a room there? What other ties do you have in Australia (assets, bank accounts, family, sporting clubs etc).
2) Have you set up new residence overseas.
If you are traveling a lot, and jumping country to country this can be difficult. Have you got a new permanent residence. Have you 'settled' in a new house and created ties to a new country. What visa/residency have you received from the new country.
The list goes on. However, you can potentially be out of Australia for many years, and the ATO will still consider you a resident. Time spent in/out of the country is only one piece of the puzzle.
I also don't get what you mean by "make use of the tax free thresholds". As an Australian non-resident, you get slugged more tax on any Australian income - though don't pay tax on any foreign earnings.
Blacky
I think he wants to avoid becoming a non resident so he can keep his tax free threshold. As you know, there's no benefit in being a non resident if most of your income is derived in Oz.
I've got two scenarios in mind.
1) put everything into storage, rent out PPOR, combined with investment income from Aussie assets (taxable income), I will be able to travel indefinitely across low cost countries....but would like to retain as a resident for tax purposes. In effect a mini retirement for ideally 1-5 years, meanwhile continue to let my assets compound, before coming back. I have the impression that the ATO will only allow this for roughly a year or so before having to come back otherwise will be classified as non resident.
2) don't rent out PPOR and fly back every few months so in effect i am taking lots of overseas holidays, in order to retain residency (costly and prohibitive). I'd probably have to work 6-9 months in a year to be able to afford to travel for 3 months.
How do others do it?
1) put everything into storage, rent out PPOR, combined with investment income from Aussie assets (taxable income), I will be able to travel indefinitely across low cost countries....but would like to retain as a resident for tax purposes. In effect a mini retirement for ideally 1-5 years, meanwhile continue to let my assets compound, before coming back. I have the impression that the ATO will only allow this for roughly a year or so before having to come back otherwise will be classified as non resident.
2) don't rent out PPOR and fly back every few months so in effect i am taking lots of overseas holidays, in order to retain residency (costly and prohibitive). I'd probably have to work 6-9 months in a year to be able to afford to travel for 3 months.
How do others do it?
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You should be fairly safe in remaining a resident under that scenario (IMO). Provided that you don't establish a 'base' (ie a PPOR) overseas, and maintain your assets in Oz you would most likely remain a resident of Oz.
But again best to check with an accountant before you go.
Blacky
Option #1 will give you more income from renting out your home but traveling for 1-5 years without coming home during that time for significant periods (3mths) will get you classified as a non-res.
Option #2 will reduce your income by getting no rent from your PPOR and cost more in return flights but you won't lose your resident status.
I chose #1 and became a non-resident because I could get more money renting out my place and save on airfares going to Oz regularly. Plus the cost of living in Oz is expensive while I'm there.. food, accom and transport prices in Oz are insane. The downside is I pay more taxes after losing my tax free threshold and pay 32.5% on the first 80k of Oz income but this is offset by living life on my terms. I live in places where I can do virtually anything I want without fear of arrest or offending someone for being politically incorrect. I've found corruption is great when you can afford it.
way exaggerated figures I think.
I and all of my friends could live a Very comfortable life style on $50k, particularly when it states a "home owning couple"
People raise families, pay mortgages and cars on $40k so the whole thing is a beat up.
When you your hit older years you already own that much "stuff" you need to get rid of it, not buy more. I have wardrobes full of clothes and a garage full of tools, we own a couple of cars, living on $50k is easy.
Medical expenses are dearer but if you get $1 of pension then meds are cheaper than someone with kids on $40k
Load of rubbish in my opinion
People raise families, pay mortgages and cars on $40k so the whole thing is a beat up.
When you your hit older years you already own that much "stuff" you need to get rid of it, not buy more. I have wardrobes full of clothes and a garage full of tools, we own a couple of cars, living on $50k is easy.
Medical expenses are dearer but if you get $1 of pension then meds are cheaper than someone with kids on $40k
Load of rubbish in my opinion
Comfortable lifestyle ? couple
Housing $91.77
Energy $56.53
Food $198.13
Clothing 5 $57.37
Household goods and services $87.57
Health $142.30
Transport $145.86
Leisure $306.41
Communications $32.64
Total per week $1,118.58
Total per year $58,326
The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures.
Housing $91.77
Energy $56.53
Food $198.13
Clothing 5 $57.37
Household goods and services $87.57
Health $142.30
Transport $145.86
Leisure $306.41
Communications $32.64
Total per week $1,118.58
Total per year $58,326
The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures.
Transport is $80 a week too much, leisure could be half that as well, when you get older you are simply unable to travel all the time.
This is a wish list created by younger people who have had very little experience with being old or with aged people.
I agree that in the first 5 years of retirement the figures are realistic but after that you could take $10k pa off that easily, probably $20k actually.
Last year we went to NZ and QLD and we spent about $35k all year. My council rates are $2600 pa and our medical is $3500 pa and we eat out once a week. We drive 2 cars and buy anything we need when we need it.
$58k is a beat up
This is a wish list created by younger people who have had very little experience with being old or with aged people.
I agree that in the first 5 years of retirement the figures are realistic but after that you could take $10k pa off that easily, probably $20k actually.
Last year we went to NZ and QLD and we spent about $35k all year. My council rates are $2600 pa and our medical is $3500 pa and we eat out once a week. We drive 2 cars and buy anything we need when we need it.
$58k is a beat up
