Planned to buy PPOR then be an expat for a few years

I planned to buy my first home, then live in it to get certain FHO benefit, before going overseas for a few years to take care of aging in-laws.

I see now that as soon as you become an expat you loose all CGT concession forever. So this will be the investment property technically and I will buy the PPOR when I get back.

Taking that into consideration what is my best option for tax purposes? (I may make another thread in the other forum about what to buy.)

Would something like a trust be useful or would the overhead to look after it take take any benefit with one property?

If I can swing a property that is positively geared I will get taxed at the rate of an overseas resident.
If I put all the money into the loan does that mean I don't need to pay tax? Or would that only work with a trust?

A friend told me some new ruling coming in that I can come back in the country 45 days in the year to still be classed as an Australian for tax purposes. Anyone heard of that?

Of course, these are questions to ask a Tax accountant, but I just want to try and get as much info as I can before I walk into that meeting.

 

not true.

The laws surrounding tax residency are being looked at and will likely change soon.

 

That is good to hear, thanks. I will keep my eye out for updates.

 

The term expat has zero relevance for tax purposes. Its a little offensive IMO as its a white mans term for migrant. We call other people of other cultures migrants dont we. People emmigrate and immigrate. But aussies who go overseas are expats. Never heard of Syrians calling themselves expats when they fled here.

And that could be the issue. Moving o/seas doesnt mean tax residency changes. Not only are the laws under review there have been some cases in recent years that seem to even recognise that someone who departs Australia for many many years can still be a tax resident. with or without returning. The further issue is the double tax treaty which may deem a person to be a resident of Australian iof they need to consider the tie breaker tests.

These are a concise summary that is recent based on the BOT review just released : Proposed changes to the tax residency provisions for individuals explained - Tax - Australia
Proposed changes to the tax residency provisions for individuals explained

 

No I don't if they are expats. I have had this conversation numerous times, usually with people who say 'I'm an expat' and I say 'No, you are an immigrant'. I agree in part that one of the words has gotten a dirty name in the press because of its alliteration with the word 'illegal' and that seems why particularly the English don't like to call themselves that.
After analysis of the literature, much of which talks about the ramifications the nomenclature has in relation to government policy influencing the outcomes for low paid workers in countries like Singapore, I've come to the conclusion that the long and short of it has to do with intent; "immigrant" = permanent, "expat" = temporary.
e.g. Philipinno workers in Dubai = expat workers. Japanese business person in Bangkok = expat workers. My Dad who came to Australia in the early 80s and never left = immigrant.
In you example I don't think the Syrians really want to go back.

I would say both are migrants but that term seems to be used primarily for seasonal labor. Which makes sense because the work sort of implies constant movement. So the rule of thumb there is have they taken their family with them.

The reason I use that specific word in the title is because it would be a temporary move for a maximum of 5 years. But also that is the word uses in most of the articles
I would call my self an immigrant If I suddenly got permanent residency outside Australia. Or event still had the intent of staying, which is ironic because the visa i would be on would be a non-immigrant visa.

To say it is a white mans word is not true. I worked with many Indian expats in Singapore who had been expats in Japan previously. In Bangkok the government just calls us all Aliens!

Thanks for this, the ATO website and their tool doesn't take this into account.

So it seems I would be an individual who spends less than 183 days in Australia but would take into account the following:

• Whether the individual has a right to reside permanently in Australia
• Whether the individual has economic interests in Australia.

But that is not what I was referring to originally. When I searched I came up with articles like this one saying you would need to pay CGT on main residence but no mention if it has to do with whether you are a resident for tax purposes.
Thousands of Australian expats face tax slug

This website suggests, and what I think you are saying, If you stay a stay an Australian tax residents then there is no problem. The exemption is only ignored if you sell whilst no being a tax resident.
Changes In Main Residence Exemption For Expats

 

can't say i've ever heard anyone being offended by the term expat.

same as Philippines you are either a resident alien or non resident alien.

 

Ditto USA... They use the resident alien concept. This distinguishes from "citizens". The USA and Eritrea have a citizenship based tax base.

I assist a welfare agency and they despise the word. Nobody ever calls a sudanese an expat. In fact we have millions of greeks, chinese, vietnamese etc and I cant say I have even heard a aussie call one a expat.

 

You may be looking at the resides test for a INBOUND person. It is a statutory test. No relevance for departure. One of the proposed goals of a tax law re-write is to insert some statutory tests for departure.

If you want to be confused try to read...and uderstand this : Residency - the resides test and then read some tax cases which dont always comply

 

an expat is someone working in a foreign country temporarily. An immigrant is someone that permanently moves countries.

 

There is another write-up on the proposed residency changes here:
Changes to the Australian Tax Residency Rules Affecting Expats

The proposed rules make it very much harder to become a non-resident. As an academic exercise, I applied the new rules against my own tax residency history:
Actual:
Last 10 years: 6 months resident/9.5 years non-resident
Previous 10 years: 5 years resident/5 years non-resident
Previous 10 years: 3 years resident/ 7 years non-resident
So going back 30 years I have been 8.5 years resident/21.5 years non-resident
New rules:
I would have always been a tax resident for the full 30 years.
Why? It's because I have been in Australia for 45 days in most years, am a citizen, have economic interests in Australia, and our former PPOR has often been available to stay in between tenancies.

With the new rules it's also very vague about "Australian Economic Interests". Owning an IP would satisfy this, but what is "significant" money in a bank account? What about owning ASX listed securities? What about superannuation? Would for example a $1M super balance satisfy this test?

 

I guess you also need to balance out if it is better to be a foreign resident for the period you are abroad. Italy for example currently has a rule for returning citizens where they tax you only on 30% of your gross income. My understanding but I am not an expert is that you still need to lodge a tax return, once all the deductions are calculated, if you are positive then you'll need to pay taxes at foreign resident marginal rates, if you are negative you`ll bring forward your losses and can use them to offset your wage once back to Australia. Keep in mind you`ll lose the 50% CGT discount if you sell while non-resident and if you don`t sell for the period you have been non -resident.

 

That is the intention, to make it harder. Super isnt a economic interest as it is preserved. However...Commonwealth or military is. Super is not a suitable test as you dont "own" it. You stand posessed on a future inteerst however. Anyone who is a citizen cant access super early by departing. Australian interests would need to be defined. Property is likely to be included BUT why should not selling a former home or IP count ? . Like all laws ...its followed by a list of tax rulings. A economic interest on arrival may be something like buying or starting a business or a stake in one.

Note you are referring to the proposed COMMENCING residency rules so I think its a mute issue for a resident who departs as different tests apply and economic interests are not "necessarily" one of them. It does raise a interesting issue. At present if Gina Reinhardt sought to move to NY her iron ore and other interests may mean she has ties with Australia. Its why Murdoch also sought US citizenship and made major changes to sever himself from Australia. The new tests dont appear to have that same issue. Same with Actors...If Hugh Jackman departs to work for three or five years in New Yoork and LA has he ceased residency and now falls under US jurisdiction ? Perhaps that where the DTA kicks in..... I see new questions to be asked.

 

the proposed rules deal with commencing and ceasing residency