Determining your Australian tax residency status
So you have decided it’s time to leave Australia and spread your wings. Having said goodbye to all your family and friends you jumped on that big jet plane and flew off into the wilderness, then you ask the question… Am I still an Australian?
While you might still love a Bunnings snag, think Vegemite on toast is a perfectly normal breakfast and consider drinking Fosters to be a cardinal sin, this article is set out to help you with the practical answer, not the philosophical one.
A person who ‘resides’ in Australia (ie: lives in Australia in a settled like manner) is considered a tax resident of Australia. As a general rule, an individual is considered to reside somewhere when they have an intention to live in that location for six months or more.
Relevant factors to take into consideration if you think you’re still an Australian resident:
· family and business/employment ties
· maintenance and location of assets
· social and living arrangements.
The domicile test: For those that still have property back in Australia.
Broadly, a person whose “domicile” is in Australia is a tax resident unless the Australian Taxation Office (ATO) is satisfied that their “permanent place of abode” is outside Australia.
· “Domicile” is a legal concept which refers to a person’s permanent home. A person usually acquires a domicile at birth but can change their domicile by intending to make a home indefinitely in another country and taking steps to do so.
· In this context, “permanent place of abode” does not mean that the person has to intend to live there indefinitely. If a person is living somewhere in more than a temporary manner, this place can be a “permanent place of abode”.
The following factors should be taken into account when determining whether or not you are an Australian resident for this test:
· Your intended and actual length of time overseas. The ATO considers a period of two years or more to be a substantial period for the purpose of determining tax residence
· Your intention to return to Australia
· Whether you establish a home overseas
· Whether your family has accompanied you overseas
· Whether you rent out your home in Australia or cancel a lease
· The duration and continuity of your presence overseas
· Your continuing ties to Australia (personal and economic)
The 183 day test: For those on FIFO work.
A person who is in Australia, continuously or intermittently, for more than 183 days in an income year is also considered to be a tax resident, unless the ATO is satisfied that their usual place of abode is outside of Australia and they do not intend to take up residence in Australia
The superannuation test: For those in a Commonwealth Superannuation Scheme (CSS)
This scheme was closed to new members in 1990, however if you believe you might be a member, please visit the website, send them an e-mail to check. http://www.css.gov.au/
However if you are A person who is a member or an eligible employee of specific Commonwealth superannuation schemes or the spouse or child of such a person then you will fall into the category of an Australian resident for tax purposes.
“The CSS closed to new members from 1 July 1990. The only exception applies to previous members who, in specific circumstances, are able to return to the scheme. The CSS is a hybrid scheme including both a defined benefit and an accumulation benefit.
CSS members can make basic contributions equal to 5% of their superannuation salary or can elect to make no contributions. Optional supplementary contributions are also allowed. Employee contributions are paid into an investment fund (the CSS Fund).
As a CSS member, your main benefit will generally be paid as a pension. The amount of that pension is determined by your reason for leaving the scheme, the time that you have contributed to the scheme and your age on leaving the scheme. In some cases your final salary will also be a factor in determining your pension.”
Ceasing Australian Residence: Generally, you are likely to cease to be an Australian tax resident if you:
· Intend to live abroad in a settled manner for a minimum period of 2 years
· Your family (spouse and children) have accompanied you
· You have rented, sold or otherwise abandoned your Australian home
The following actions may also support an argument that you will become a non-resident of Australia while you are overseas:
· Shutting any unused Australian bank accounts and advising your bank that you will not be an Australian tax resident for a certain period and that tax should be withheld from any interest payments until advised otherwise
· Writing to the share registrars for any shares that you own to advise that you will not be an Australian tax resident for a certain period and that tax should be withheld from any dividend payments until advised otherwise
· If you have a rental property or are renting your home, ensure that this is properly managed. It may be prudent to engage a real estate agent for this purpose
· Writing to the Electoral Commission and advise them that you require an overseas vote
· Resigning from or suspending any social/sporting clubs and associations
Once you have determined your Australian tax residence status, you may consider what types of income remain taxable in Australia and what tax rates apply.
Tax Compliance: What do I need to do now?
· You are required to continue to lodge tax returns annually if your assessable income exceeds the tax-free threshold.
Australian Non Residents:
· You are required to lodge a tax return to declare any Australian sourced income or gains and certain statutory income items that are taxed on a basis other than source (eg: capital gains made from certain CGT assets held on departure).
· If you do not expect to have a requirement to file Australian tax returns following the tax year of your departure, you may advise the ATO when you file your last tax return.
· In addition, if you are leaving Australia permanently and will not derive any subsequent income from Australian sources, you can lodge your income tax return early by completing a “Request for Early Assessment” in order to release any refund due to you.
So this covers off most of the basics, if you have read this far it’s probably a good idea to head over to the appropriate ATO websites and get stuck into the bedtime reading.
*This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice I do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
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Ryan Cullinan: +66 955 487 022