Long post full of noob questions related to tax residency

Hello everyone,

I've been researching a bit, and it looks like owning a property in Australia while being absent from the country is a bit of a tax minefield. I'm trying to work out if I should be buying a property at all. I think I've worked out that the "6 year rule" as of today solves the issue. But I would appreciate if someone could comment on my assumptions/questions (as of today I'm an Australian tax resident and also a citizen). Also, my apologies, the list is pretty long
But here it is:

1. As far as I understand if I'm living a life of a digital nomad (just traveling around the world without sticking around in any particular place for longer than a few months), then I'm not losing my Australian tax residency. Even if the time I spend abroad is pretty long (say, a few years). Is that correct?
2. Even if I'm employed by an overseas company, as long as I don't establish a permanent home overseas, I'm still going to be an Australian resident for tax purposes. Is that correct?
3. If I get a job in another country, and settle there for a couple of years, I lose my Australian tax residency and become a tax resident of that other country. Is that right?
4. In the scenario from question 3, how long my stay needs to be to lose the Australian tax residency? Does it basically depend on how soon I become a tax resident of that other country?
5. Can I lose my Australian tax residency before I become a tax resident of another country?
6. If I lose Australian tax residency, then all the income/losses related to the investment property are going be collected by the country where I become a resident for tax purposes. Right? Or is it still going to be payable/claimable in Australia?
7. Say I buy a place, that is going to be my PPOR before I start traveling, then lose my tax residency for a couple of years, then come back to Australia and re-establish my tax residency. Then the 6 year rule is still going to be applicable. I.e., I'm going to be exempt from paying CGT on any capital gains of that property. Is that right?
8. There is this I1 CGT event that is being triggered when an individual is losing their tax residency. But it looks like it does not apply to PPOR. Is that correct?
9. As far as I understand, tax residency does not affect land tax. Since I'm an Australian citizen, I won't need to pay land tax in NSW if the land is below a certain threshold (currently $755,000) regardless of my tax residency status. Is that correct?
10. Are there any other taxes (excluding CGT, income and land) that may become a serious issue with regards to being away from the country for an extended period of time and/or losing Australian tax residency?

 

Not necessarily. You might not have an abode.

There is a recent case, past 4 years, where this happened to a bloke who was working in Saudi and living in Dubai in a hotel. But he had a wife and children in Australia and a home here too.

possibly, - if you have no home here.

it could be straight away if you pack up and move into your new home over there.

Yes, Australia law doesn't depend on the foreign law

Australian property would still be taxable here. Whether you would also be taxed over there will depend on where you are and the laws of that country

potentially it could be exempt still

It would only apply if the main residence is sold if you elect to use s104-165 election
INCOME TAX ASSESSMENT ACT 1997 - SECT 104.165 Exception for individuals

It shouldn't affect land tax in NSW under the current laws, but it could in other states such as QLD - but there were some changes made.

state laws are generally citizenship/permanent residency based it is just the commonwealth laws such as income tax assessment act that are the main ones.

Make sure you don't rely on my answers as this is a very complex area and the laws are going to change on residence soonish.

 

Hm... This confuses me a bit more You mean, the ATO may decide that my PPOR that I had before departure from Australia is not a place of abode, and thus I'm going to lose the tax residency despite not having a place of abode overseas?

 

And if it's negatively geared, will I be able to claim the deductions?..

 

Yeah, I'm going to go through these questions with a tax agent (I assume it's a right person to talk to).

 

probably better to review all the proposed rules re residency status if making decisions. some major changes.

 

I've read about the proposed changes. According to this explanation it's going to be pretty easy to keep Australian tax residency by just spending 45+ days in Australia each financial year.
But there's no definite date as to when the changes are going to be implemented. The ATO website has "Royal assent" as a "Proposed start date". Any idea how long could it take before the proposed changes are actually implemented? Months? Years?

 

Parliament needs to vote on it. COVID and the economy is a bigger issue. There is NO DRAFT law issued yet. The commentary is mere conjecture so far. The Govt said in the budget announcement it was up for review. The Board of Taxation issued a report with some recommendations. They provide some insight but provide no assurrance.

 

The Tax Resident rules are soooo confusing & painful to apply to many individual circumstances.

For Australians wanting to travel / work abroad for a long time and want to maintain tax residency, it seems futile. If I could maintain tax residency whilst living off shore, I would in a heartbeat. The ongoing cost of becoming a non-resident for tax purposes forces many to sell up completely & take 100% of their capital offshore. Dumb choice to force upon people who are Australian citizens only.

 

Gosh! Sounds like it's many months away, if it's going to end up being implemented

 

Yeah, it is annoying.

 

longer

 

Its taken decades to get this close. I remember they were going to re-write the 1936 tax act in 1997. They never finished that job. Then several years later they had to pass a repealing law to remove the 2/3rd of old laws to thin it down as the original ntention was to simplfy tax law. Another few years. In that time the number of public rulings has mutiplied. Every new law comes with a half dozen tax rulings.

 

Yeah, unless they make it part of their election reforms, it could take many years if ever…

45+ days per year bright line test, particularly for those that are Australian citizens only, would be a vast improvement on current laws.

It would also encourage retirees / semi-retirees that want to travel / live abroad for extended periods to keep their assets in Australia rather than consider selling up due to the excessive tax burden of becoming non-resident despite being only an Australian citizen &/or not earning any income abroad.