Tax when moving overseas for work

Discussion in 'Accounting & Tax' started by wjw, 14th Oct, 2018.

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  1. wjw

    wjw Well-Known Member

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    Hi,

    Ny wife and I were born overseas and Australian PR. We have been employed full time and living in Australia since 2010.

    I’ve got a job offer overseas in Singapore and possibly starting the job sometime in mid Jan 2019. We plan to move in Dec or Jan after I resign from my Australian employment.

    I've read various ATO pages and used the tax residency calculator and still confused. I'll ask my accountant before committing to anything, but would like to tap on the brain trust here for anything to think about.

    Assuming we move out of Australia 20th December 2018. I resign on the 10th December but use up all my leave to cover my absence till the 10th Jan 2019.

    1) How will my Australian income (from July 2018 to December 2018) be taxed?

    2) How will my income in singapore (from Jan 2019 onwards) be taxed? I obviously have to pay tax in Singapore, but what about tax in Australia?

    3) If for some reason we decide to return, say… in March 2020. What implications will this have? (I understand that, generally, the ATO expects you to be overseas for 2 years to be considered as a non tax resident.

    4) Re: IP - We've got an IP that is positively geared about $10k/y with the cash we have in the offset. The depreciation is $9.5k/year. However, if we decide to use a chuck of money in the offset, and say, this brings the income from the IP down to $2k/year after expense. Is this a silly thing to do? Given that it will waste the negative gearing opportunity when we essentially have no income in Australia? Can that be carried over to future years?

    Thanks!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It sounds like you will become a non-resident for tax purposes. This will mean you will not be taxed in Australia on overseas income, but will be taxed on the Australian income, but on non-resident tax rates - no threshold and higher taxes.

    If you have property here you will lose the 50% CGT discount and main residence exemptions.
    If the properties taxable income is $2000 there will be nothing to carry forward to future years - no loss.
    If you move the money out of the offset you will have more income but where would you put it? It is likely it will generate income which would be taxed. You could take it overseas but then have to consider the overseas jurisdiction's laws and foreign exchange rates.

    Get proper tax advice.
     
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  3. Mike A

    Mike A Well-Known Member

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    Based on those limited facts why would you say he will be non resident ?

    The facts from the OP dont say much at all to come to that conclusion ?

    Have you read the recent harding case ? Its not simple anymore.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Looks like he is uprooting and moving overseas with family.
    Needs specific advise though.
     
  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I agree its a little uncertain but the PR situation etc may not assist your cause v's a citizen / or other longer term resident with extended family and other ties eg a main residence etc. But in any event the $18,200 tax free threshold would be apportioned in a year when residency changes. There are also other issues to consider incl loss of the 50% CGT discount incl past main residence exemption !! and other potential CGT events to non property assets if tax residency is impacted.
     
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  6. wjw

    wjw Well-Known Member

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    Thanks all for your reply. I agree its a very grey area (at least based on my limited understanding).

    I also note that there is a 183 day rule, whereby, if I am in Australia for more than 183 days, I am deemed a tax resident.

    To add more details, I never had and currently have no main residence. Though I bought a property recently that was meant to be my main residence, but I never moved in and it is now rented. As such, the CGT discount wouldn't apply to me anyway.

    I am uprooting and relocating my whole family (couple with one child). However, there is a slight chance we may hate it and return after 18 months. (Wondering if this would change anything?)
     
  7. wjw

    wjw Well-Known Member

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    Would the 18,200 threshold be apportioned? Under what circumstances will this happen? Will I need to satisfy anything?

    What I'm concerned about is the 2 scenarios happening.
    1) I'm not a tax resident for this FY and as such, my wife's and my Australian income from July 2018 to Dec 2018 will be taxed at 32.5% without any threshold.
    2) I'm a tax resident for this FY and whilst my Australian income for the 1st half of this FY will be tax as per usual, my overseas income earned while I am overseas will also be subjected to Australia tax rates.

    Am I correct in thinking the above scenarios are possible outcomes?
     
  8. Mike A

    Mike A Well-Known Member

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    uprooting and relocating the whole family with the intention to emigrate ?

    or uproot and relocate and then plan to return to Australia within 2 years ?

    domicile probably hasn't changed if you plan to return to Australia within a few years

    Permanent place of abode overseas ? who is renting the house in Singapore ? company ? might fail the test. more facts needed.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I would consider your tax residency may only change if in 18months you made the decision to reside permanently elsewhere HOWEVER it could be that your AU tax residency is severed when you fly out as you dont have the degree of common law connections with Australia.which operate outside the statutory "am I resident ? test" which is the 183 day rule. eg you have no home to return to, have no interests here, have no family here, only have a place of abode offshore etc

    Have you tried the ATO tax residency calculator ?? Tip - You are OUTBOUND and there are two calculators. Make sure you carefully read ever bit of information for each question (incl hyperlinks)

    The tax free threshold is apportioned for all changes of tax residency in or outbound. Item A2 in the tax return requires the date the change of residency occurs. If it occurs. This is further evidence of the self assessment basis of tax in Australia. Its an important aspect to get right
     
  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    There would be more than just this to consider. eg Non-property assets ?, CGT triggers, super etc
     
  11. Mike A

    Mike A Well-Known Member

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    he could have non residency status if his domicile hasn't changed BUT he has a permanent place of abode overseas. that definition is probably what needs to be considered. Harding's case (which is now on appeal) has caused a lot of concern with what is a permanent place of abode.
     
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  12. wjw

    wjw Well-Known Member

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    You raised an important point and I think I might have left out an important piece of information when it comes to the subject of emigrating.

    The job offer is in Singapore. I was born and raised there and only moved over to Australia as an Australian PR in 2010. Also, both my wife and I are Singapore citizen, and both our families are back in Singapore (none in Australia). I wonder if this might make the tax residency matter clearer.

    If and when we leave Australia to take up the new job in Singapore, we would be most likely living with parents for a month or two, before renting ourselves (company will not be providing accomodation) and possibly buying (but maybe not too).

    The uncertainty for me is that, IF we choose to return to Australia in 18 months, would that cause any implication as I've read on the ATO website that states there is an expectation for one to have left Australia and worked overseas for at least 2 years to be considered a non tax resident.
     
    Last edited: 17th Oct, 2018
  13. wjw

    wjw Well-Known Member

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    I'm inclined to think that I don't have much to worry about what you mentioned above (though I may be very wrong).

    I've got some shares, which I wouldn't have a problem selling if it would be a disadvantage holding them. They are currently at paper loss but I can realise those losses before I leave if it makes more sense doing so.

    We've also got super, but I assume that since we are holding on to our PR, we will still maintain our super. And it is my assumption that if we ever relinquish our PR, then we can apply to claim and withdraw our super. I'm suspect there may be some CGT implications here, but happy to deal with that later, though I know its important to consider and know this upfront.

    Would you have any thought on the above points?
     
  14. Mike A

    Mike A Well-Known Member

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    2 years is a baseline test that has been used in cases before. Easiest solution as i've advised people before is gather your facts, apply for a private ruling and sleep at night.
     
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  15. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The shares will trigger a CGT event on the day you depart if your residency ends. It can be easier to sell them. Alternately if you think they can increase in value the CGT loss may be triggered but when sold while non-resident the profit is not taxed :)
     
  16. aussieB

    aussieB Well-Known Member

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    How much would the answers change if OP was a citizen ?
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    citizenship has nothing to do with income tax so there would be no changes at all.
    But it could effect things such as land tax in certain states.
     
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  18. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes NSW, VIC and QLD all consider persons who are not ordinarily resident to be subject to a higher or additional land tax charge.
    eg NSW : Land tax surcharge | Revenue NSW

    PRs will be impacted from their flight out even if tax residency remains in Australia.
     
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  19. wjw

    wjw Well-Known Member

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    Thanks for highlighting this. This sounds like huge implications as I realised that my land tax will increase by $5k! Geez. That's crazy! Does this sound about right or am i missing something?
     
  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Who could say without knowing any details. But it is possible.