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Tax residency whilst travelling

Discussion in 'Accounting & Tax' started by ellejay, 19th Mar, 2016.

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  1. ellejay

    ellejay Well-Known Member

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    We're seriously considering spending 8 months or more next year travelling across Europe in a motorhome. Could we still be considered Australian residents for tax purposes? Is there a maximum time you can be away and still claim tax residency? We wouldn't be staying in any particular country for more than a few months.
     
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  2. D.T.

    D.T. Adelaide Property Manager Business Member

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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sounds like you would still be tax residents.
     
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  4. ellejay

    ellejay Well-Known Member

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    Thanks, I should have looked at the ATO site :) I'd prefer to still be tax resident so that's good.
     
  5. lost nomad

    lost nomad Well-Known Member

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    Just returned from a similar trip- moving around a lot & not working.

    Did my tax return which only had a couple of months of income on it and didn't have any issues.

    If you have any assests with great capital gains that you want to off load ( i.e shares) sell them in that period to pay less/no tax.
     
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  6. ellejay

    ellejay Well-Known Member

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    Hey, love the name! Yep that would be the plan. Going to do up some ips, then travel for a while and sell them one by one when needed. Would love to hear about your trip if you have time.
     
    Last edited: 19th Mar, 2016
  7. Rob G

    Rob G Well-Known Member

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    Completely wrong.
     
  8. D.T.

    D.T. Adelaide Property Manager Business Member

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    Sounds ok on the surface, whats wrong with it?
     
  9. sanj

    sanj Well-Known Member

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    this is potentially dangerously incorrect advice

    you will still be taxed as an australian resident, how would great capital gains be reduced to no tax payable just because you are travelling and potentially dont have much income in the year?

    the only difference is that you wont have your income (if youre not earning any durign the period away) but apart from that you're taxed normally
     
  10. D.T.

    D.T. Adelaide Property Manager Business Member

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    Simply because not earnt much in the year as been away from work / the country. So proceeds of property might put you in 37c bracket instead of 47c bracket for example.
     
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  11. sanj

    sanj Well-Known Member

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    I addressed that above.
     
  12. HUGH72

    HUGH72 Well-Known Member

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    Nomad said less/no tax, nothing to do with residency. Only a couple of months of other income.
    Shares could be sold in carefully assessed amounts.
    Sounds reasonable it me.
     
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  13. ellejay

    ellejay Well-Known Member

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    Most of my property with good gains are NZ so I'd only be selling those when we're resident in NZ, so not until after this trip.

    I only have one Aus property with capital gains but I'd always have to declare those gains in Aus anyway, wouldn't I? I thought that I'd have to be resident in Aus to sell that property and at least pay only 50% cgt as opposed to 100% if I'm living elsewhere. I'd plan to sell that one when living in Aus and somewhere in between selling NZ properties as an NZ resident.
     
  14. ellejay

    ellejay Well-Known Member

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    What's the alternative? Surely you'd always have to pay tax on property gains? If I'm travelling and earning not much, but still a resident for tax purposes wouldn't that be a good time to sell if needed? Actually I won't be selling any Aus property in that time unless some catastrophe happens so not sure what the argument is about :) I get that the benefit would be to sell then though as we won't be earning much.
     
  15. Rob G

    Rob G Well-Known Member

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    If you depart Australia always intending to return one day and do not establish a permanent place of abode in another country then you remain resident at all times. s.6(1) ITAA36.

    See Case 2/98, 98 ATC 105 concerning an Australian tourist travelling overseas for 2 years.

    If you establish a settled/usual place of abode for a substantial period in another country then you might be a non-resident under Australian law. It is not an issue of choice.

    As a general guide, IT2650 regards any intended period of less that 2 years in a stable routine around a new settled/usual place of abode as being merely temporary.

    Note the examples in that ruling still require a possibility of staying longer. Therefore a two year fixed contract intending to return may be deemed temporary for the first two years of departure until a pattern is established or the commitment to any possible extension becoming apparent.

    All subject to any international tax agreement between Australia and the other country that will be trying to claim you as resident.

    Sure the timing of a capital gain while not earning much worldwide income may be advantageous but an absentee sale of Australian real estate is still subject to an Australian tax return. If you are a non-resident at the time then your tax rate is a minimum 32.5% and you lose any discount on accrued capital gains since the change.

    Don't forget that mere presence in another country for more than a few months may make you a resident under their laws and they may not allow a CGT discount on your Australian capital gains, depends upon any international agreement with Australia as well.
     
    Last edited: 19th Mar, 2016
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  16. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The OECD model treaty adopted by most countries wont recognise a person on a visitors Visa or Holiday Visa as a resident but each country may have minor variations too. ie Overstays. Your comment about retaining property here (ie a home) may be a solid matter that supports your domicile as here even if your do reside "from time to time" overseas. I suspect the OP comment about 8 months of so wont pose a major issue since you are travelling and dont intend to reside . Just dont overstay tourist visa limits and watch non-OECD nations. Dont stay too long in those.
     
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