Australian Tax Question

[sgilli3]

Hi Tiger,
I was chatting to our accountant today in regards to a few changes we have to our tax situation, and from what I can gather...for us:
We will not be taxed in Oz as this is our only income (and even when we return to Oz...the money we make here will be our only income)
If we return to Oz and are making money here AND in Oz then we will be liable to pay tax.

For us to keep our money totally tax free when we return to Oz my hubby needs to spend more than 193 days per tax year in Dubai. Anything out of that and he will classes a resident of Oz for tax purposes.

Sooo confusing. We are looking at requesting a private ruling from the Tax Office...
So far, in our years here, we have managed, for the year we returned home, not to pay tax on that money. We were asked by Centerlink though to show amount earned, so they could calculate whether Family Benefit backpay would be paid to us.

[flossie]

Originally Posted by Tiger

Just a quick question? How do you stop Australia taxing you? I have been through the tax act and found the following. If the country you work is tax free you are not exempt from tax purposes. See 2D

Do you have anyone I can speak to about this?

Many thanks.


INCOME TAX ASSESSMENT ACT 1936 - SECT 23AG
Exemption of income earned in overseas employment
(1) Where a resident, being a natural person, has been engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service is exempt from tax.
(1A) A person is taken, for the purposes of subsection (1), to have been engaged in foreign service for a continuous period of 91 days if:
(a) the person died at a time when he or she was engaged in foreign service for a continuous period of less than 91 days; and
(b) he or she would have otherwise continued to be engaged in the foreign service; and
(c) his or her continuous period of engagement in the foreign service would have otherwise been a period of at least 91 days.
(2) An amount of foreign earnings derived in a foreign country is not exempt from tax under this section if the amount is exempt from income tax in the foreign country only because of any of the following:
(a) a law of the foreign country giving effect to a double tax agreement;
(b) a double tax agreement;
(c) provisions of a law of the foreign country under which income covered by any of the following categories is generally exempt from income tax:
(i) income derived in the capacity of an employee;
(ii) income from personal services;
(iii) similar income;
(d) the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in paragraph (c);
(e) a law of the foreign country corresponding to the International Organisations (Privileges and Immunities) Act 1963 or to the regulations under that Act;
(f) an international agreement to which Australia is a party and that deals with:
(i) diplomatic or consular privileges and immunities; or
(ii) privileges and immunities in relation to persons connected with international organisations;
(g) a law of the foreign country giving effect to an agreement covered by paragraph (f).
(2A) Subsection (2) does not apply in relation to foreign earnings to the extent that the person derived them from foreign service in Iraq after 31 December 2002 but before 1 May 2004.
(3) If the income of a taxpayer of a year of income consists of an amount that is exempt from tax under this section (in this section called the exempt amount ) and other income, the amount of tax (if any) payable in respect of the other income is calculated using the formula:

Before we moved to Dubai, my DH worked offshore. Basically,most of the info you have posted has to do with people working on rigs etc. If they work in a country with a double tax agreement with Australia, then they are not liable to pay tax to Australia if they are liable to pay tax in the country they have been working in. The 91 days mentioned is also to do with countries with a double tax agreement with Australia. This means that even if you are a resident for tax purposes during your offshore work, if you work continuously for 91 days in the same country, Australia has no claims on tax on that income. This used to work in our favour when DH had his old job and we were living in Australia. Because UAE has no income tax, this doesn't apply. This is why you have to prove you are a non-resident for tax purposes to be exempt from income tax in Australia while earning in Dubai. How do you do this? There are a few basic rules.

You have to intend to be out of the country for more than two years.

You cannot maintain a home in Australia.

You must notify all banking institutions etc that you are a non-resident for tax purposes.

You should limit your trips back home.

Any houses you have in Australia must be either rented our available for rent the whole time you are away.

Our accountant also advised us that my husband could not have any dependants living in Australia while he was working Dubai. This differs to what Sgilli has been told by her accountant. This highlights how ambiguous the tax law is and why it is important to get an accountant's advice. It may be worthwhile getting a private ruling just so you know exactly where you stand.

[sgilli3]

Hi Flossie,
You are soooo right..the law is very ambiguous.
From what I understand, for us, when we return to Oz, hubby can still earn money OS and it still be tax free...so long he is gone more than 193 days (approx 6 months)...and I am earning nothing.
As soon as either of us earn anything in Oz-it is taxed.

Like I said..this is why we are looking at a private ruling.
The above rule suits us (DH will travel between Oz & Dubai when we return to live in Oz), as our business is here...but we want it in writing !!!

edited to add: we are also registered as non residents, and are even off the electoral role

[Tiger]

Do you mind sending me contact details of your accountant? I have been getting conflicting advice on this side. Your's sounds like they know more about the matter.

Appreciate any assistance.

TB

[flossie]

Stephen Thompson at Shakespeare and Co in West Perth. They have a website, so if you do a Google search, you can get their details. We actually use Brad Loftus but everything goes through the partners as well. Sorry, at 'home' eating Burger Rings and Dim Sims (sorry, Sgilli!!), so don't have the details on me. They deal with alot of people we know in the oil industry, also. If they don't know something, they'll find out. They don't get insulted if you question them, they just do more research and then let you know they were right all along. LOL.

p.s. Am getting fat!!!

pps..Not sure if you were actually speaking to me or Sgilli, so thought I'd answer in case it was me. Can't stress enough to find an accountant who has experience in offshore cases. So many accountants don't!!

[alli]

I may just have to use your recommendation too. Does he deal with people from Sydney do you reckon?

[flossie]

Alli, they deal with us all the way in Dubai, so I guess it doesn't matter where you're from. No harm in emailing them and asking?

[ugogirl]

Hi All

After reading this thread last week, I went to see my accountant as I was considering whether to leave my apartment here unrented when I go to Dubai.

I also asked her a few more questions. Here is the summary:

* part year tax income - when you are a non-resident for part of the tax year, you only pay tax on the income you earn in Australia. Also the tax free threshold is prorata, eg. if you are in Australia for 6 months, then you only get half of the $5000 tax free threshold.

* your accountant notifies the ATO of your residency status when they do your return.

* any money you make overseas and deposit into your Aus bank accounts is not taxed (only the interest earned on money in that account is taxed).

* if you have an investment property here, being a non-resident, you can claim that part of the trip that is for the investment property (ie. maintenance, etc).

* any income you earn on the investment property (less expenses) is taxed.

* any income you earn from buying australian equities (shares) is taxed (no matter where the the account is based).

* keeping a property here (without renting it out) is no problem. You can prove you are out of the country with immigration records. Suggestion is don't have any mail sent there anyway.

* of course if you do rent your property out, then you can claim all the expenses (including interest on loans, etc).

* I went to my bank and they said I don't need to notify them about living overseas, except if you're changing your address in order to have your statements mailed to your overseas address.

* the ATO has the right to remove a 10% provisional tax from your Aus bank account for potential interest earned (but this sorts itself out when you do your tax return) - and they don't know you're a non-resident until your first tax return anyway.

Hope this helps. Double check with an accountant or the ATO as well.

cheers

[sgilli3]

Thanks for adding a little more information to help others out UGoGirl.

Much appreciated

[TAPXE]

Originally Posted by ugogirl

Hi All

After reading this thread last week, I went to see my accountant as I was considering whether to leave my apartment here unrented when I go to Dubai.

I also asked her a few more questions. Here is the summary:

* part year tax income - when you are a non-resident for part of the tax year, you only pay tax on the income you earn in Australia. Also the tax free threshold is prorata, eg. if you are in Australia for 6 months, then you only get half of the $5000 tax free threshold.

* your accountant notifies the ATO of your residency status when they do your return.

* any money you make overseas and deposit into your Aus bank accounts is not taxed (only the interest earned on money in that account is taxed).

* if you have an investment property here, being a non-resident, you can claim that part of the trip that is for the investment property (ie. maintenance, etc).

* any income you earn on the investment property (less expenses) is taxed.

* any income you earn from buying australian equities (shares) is taxed (no matter where the the account is based).

* keeping a property here (without renting it out) is no problem. You can prove you are out of the country with immigration records. Suggestion is don't have any mail sent there anyway.

* of course if you do rent your property out, then you can claim all the expenses (including interest on loans, etc).

* I went to my bank and they said I don't need to notify them about living overseas, except if you're changing your address in order to have your statements mailed to your overseas address.

* the ATO has the right to remove a 10% provisional tax from your Aus bank account for potential interest earned (but this sorts itself out when you do your tax return) - and they don't know you're a non-resident until your first tax return anyway.

Hope this helps. Double check with an accountant or the ATO as well.

cheers

Hi ugogirl,

Thanks for the great info. You mention that any income you earn from buying australian equities is taxed, however it is my understanding that as long as you are a non resident, there is no capital gains tax on australian equities (only property).

See: w w w . ato.gov.au/individuals/content.asp?doc=/content/64155.htm&pc=001/002/012/014/003&mnu=&mfp=&st=&cy=1

Can anyone clarify which is correct?

Many thanks