Tax changes for expats

[4MyEgo]

1 hour ago, MadMuhammad said:

Extensive and helpful as always mate, thanks for the detailed reply.

I’ve just been spitballing the idea of ED visa and the taxbreak that may provide, definitely worth looking into. 

Thank you for the offered assistance regarding an accountant but I am in Melbourne and I do have an accountant that takes care of my tax for my portfolio, he’ll be my next port of call.

 

I may PM you regarding shipping and transport of some household goods sometime in the future though. I have quotes from a couple of companies but your costs are far below these. I will be bringing over my PC gaming setup and some clothing etc but as far as I’m aware I can have one duty free shipment into the country if I have a minimum year long visa.

 

thanks again 

Anytime mate, just got to watch out for duties payable on certain items when shipping and these Thai companies appear to give you a price per kilo, you box it, wrap it and they put it on a container with others, we ended up with everything we sent.

 

Good to hear you have an accountant that will sort things for you.

 

Don't know much about the ED visa, but if that means you will be working here, just watch out if there will be double taxing on your worldwide income, not that I know much about that or what countries are in the net.

 

PM me anytime and if I can help a mate out, will do.

 

Cheers 

[ghworker2010]

22 hours ago, 4MyEgo said:

Hi Tony a very interesting blog, but can I say one thing as an Aussie xpat, its not all that depressing if you stumbled onto the research I have, i.e. you can avoid paying tax if you invest your money in the ASX, I don't know if you or the other readers here know this, you can sell your property that is providing you with an income less 32c in the dollar to the tax man, less maintenance costs, water, council rates, insurances, vacancy factors, agents fees, agents re-letting fees, advertising costs etc etc, then you have capital gains tax, but not before you get a retrospective fair market valuation as at the date you left the country, hopefully the valuer will give you a higher figure to minimise your future liability.
I mean seriously who wants to hang onto a property, by the time you add the above its a 50/50 split, however if you invested into a low risk portfolio in the ASX through a good broker you could be earning 5%-6% net yearly, and very easily, all tax free, i.e. you by fully franked shares (tax paid at the time the dividend is paid), problem solved and any capital gains tax is yours because there is non to be paid, sound to good to be true, well its true and legal, I have been doing it and there is no problem, and sure, shares rise and fall, but if your not selling when they are down, your good, I sell when I want to take profit, and I also get involved in my portfolio, and in 6 months I was managing 7.5% net, that's 15% per annum tax free with a low risk portfolio, so worth looking into as a foreign resident.

Are you saying that fully franked shares are all tax free and the capital gains?

 

What about investing in international shares? I heard capital gains on them are also tax free. Is this correct?

[Straight8]

1 hour ago, 4MyEgo said:

This won't happen in our life time, but agree there is an enormous amount of money in the stock market from superannuation, as well as real estate.

 

Retirees will only go back to work when they drop the old age pension or lift the old age pension age to 70 for those thinking of getting the pension, who don't have enough to stand on their own two feet due to the cost of living and no wage increase in the past decade.

but the problem would be, who will employ a 55+ year old person these days, let alone 65+.

 

Agree, aint gonna happen.

[4MyEgo]

4 minutes ago, ghworker2010 said:

Are you saying that fully franked shares are all tax free and the capital gains?

 

What about investing in international shares? I heard capital gains on them are also tax free. Is this correct?

Yes correct.

 

I can't answer your 2nd question as I do not invest in any other shares except those listed on the ASX.

[gearbox]

Lots of useful info in the thread.

 

The data matching capabilities and the information exchange between the govt departments is not perfect yet, but is getting better and better. 

 

Did anyone try to move all of their assets to a tax friendly country like Singapore? AFAIK the tax is very low there on income from shares and capital gains, but seems to be difficult to open a bank account without employment pass.

[Bikeman93]

18 hours ago, gearbox said:

The data matching capabilities and the information exchange between the govt departments is not perfect yet, but is getting better and better. 

They know more about you than you could possibly remember. It only appears imperfect because they wait until there is max payoff for them after 5 years or so of dodging and thinking your getting away with it.  

[Bikeman93]

On ‎2‎/‎15‎/‎2018 at 1:58 PM, Lacessit said:

I think the ATO has a lot bigger fish to fry than a few expats living overseas.

If the earlier statement that 1 million Aussies live overseas is true that makes a worthy target.

[Will27]

2 hours ago, Bikeman93 said:

If the earlier statement that 1 million Aussies live overseas is true that makes a worthy target.

The ATO normally target certain occupations in one year and often go on income levels.

 

Those who are just on the OAP would be very unlikely to be targeted IMO.

Especially as it's been pointed out on here that the OAP is tax free.

 

 

[gaviny]

This is correct, but excludes shares that are fully franked, i.e. tax is already taken out when the dividend is paid, and all capital gains on the shares are not taxed.
 
Forget property in Australia and earning an income from within Australia, unless its fully franked shares.
 
It is really simple to invest, but get a good broker, and a low risk portfolio, learn because it will be new to you, owning property in Australia is not for non residents, the tax plus outgoings will end up being 50% to you from your 100% investment, then you have capital gains tax to consider when you sell.
 
I sold and invested in the stock market, not knowing anything but property for 25 years, best thing I ever did, earning around 15% per annum, but I am also hands on, buying and selling as well as receiving dividends, but if you want 5%-6% net per annum, its easily achievable, and yeas shares go up and down, the thing is, you never sell when they are down, you top up with reserves and take the profit when they are up.
 
There is no point moaning and groaning about what is, it is what it is, and the only way around it is the way I am telling you, and if you start doing your due diligence, you too will be a tax free non resident of Australia and loving it.

I just found out the hard way with properties land tax ,if you are a non resident your tax threshold kicks in at over $350G as compared to $600G and as of last financial year they also added another tax on top called Absentee Charge of 1.5pc flat rate on your properties land value.

Sent from my [device_name] using http://Thailand Forum - Thaivisa mobile app

[4MyEgo]

1 hour ago, gaviny said:

I just found out the hard way with properties land tax ,if you are a non resident your tax threshold kicks in at over $350G as compared to $600G and as of last financial year they also added another tax on top called Absentee Charge of 1.5pc flat rate on your properties land value.

Sent from my [device_name] using http://Thailand Forum - Thaivisa mobile app
 

Sorry to hear, I would strongly recommend, if you haven't already, obtain a property valuation from a certified property valuer, not real estate agent, to value your property as the date you left, or started collecting rent, the aim being to value it as high as possible to minimise your future capital gains tax payable.

 

If you need more info PM me, or reply to this post.

[ELVIS123456]

On 2/15/2018 at 6:51 AM, 4MyEgo said:

The rules are pretty clear, i.e. if you are out of the country for more than 183 days in any "financial year" you are a non resident, unless you can prove otherwise, this is done on an individual basis, nothing is cut and dry, the ATO are not stupid, just money hungry dogs sniffing out all potential non residents, so as long as you have all the individual basis points covered as per the legislation, you should be fine, but like I said, its not that cut and dry and most will fall by the wayside if ever audited, the most interesting part of the legislation that I found was that your "abode" could be a park, i.e. your normal place of residence when outside of Australia.

 

The tool on the website is just a guide and if everyone thinks that a machine that gives you a guide on your status, is leaving themselves open, mind you fat chance the ATO will come down on anyone, unless audited, but its still a possibility, and with technology and government agencies linked up, I am sure they have a list of people who are out of the country for more than 6 months and if doing their returns, are having a look, i.e. if they have the man power because there are about 1 million Xpats overseas as far as I am aware. 

The statement above "The rules are pretty clear, i.e. if you are out of the country for more than 183 days in any "financial year" you are a non resident, unless you can prove otherwise...."  is correct in some, but not in all situations.  This is the wording from the relevant ATO site:

 

The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and don't need to apply any of the other residency tests.

If you don't satisfy the resides test, you'll still be considered an Australian resident if you satisfy one of three statutory tests:

• The domicile test: You're an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.
• The 183-day test: If you're actually present in Australia for more than half the income year, whether continuously or with breaks, you may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here.
• The superannuation test: This test ensures that Australian government employees working at Australian posts overseas are treated as Australian residents.

Who this section is meant to advise is the people who 'want' to be a non-resident for tax purposes.  If you are not a 'resident', then you can still be a resident for tax IF you satisfy one of the three tests - including being in Aust for net 183 or more days in any year - "unless your usual place of abode is outside Australia and you have no intention of taking up residence here."  This section is for people who are not resident in Aust and do not want to be a tax resident - if you are not in Aust for net 183 or more days then you are definitely a non-resident for tax.

 

You can be outside Aust for up to 2 years at a time, and still be considered a tax resident. After 2 years absence it becomes more problematic, but it is still possible to remain a resident for tax.  

 

https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/Residency-tests/

 

In my plans, I wish to remain a resident for tax purposes for many reasons, and being able to return for any serious medical issues using Medicare is just one of them.  Being a tax resident (and liable for the medicare levy if applicable) greatly assists in my plans. 

 

Hopefully 'they' wont close the loophole that allows non-residents to gain tax advantages through the use of franked dividend shares, for those undertaking that course of action, but it would be wise to have a Plan B if they do take that route. Likewise, those of us with other plans need Plan Bs and Cs if they decide to stop expats receiving the OAP when overseas and stop them getting Medicare immediately when they return.  

 

[4MyEgo]

8 hours ago, ELVIS123456 said:

Hopefully 'they' wont close the loophole that allows non-residents to gain tax advantages through the use of franked dividend shares, for those undertaking that course of action, but it would be wise to have a Plan B if they do take that route. Likewise, those of us with other plans need Plan Bs and Cs if they decide to stop expats receiving the OAP when overseas and stop them getting Medicare immediately when they return.

Hey ELVIS123456 excellent read in the link you provided, and as mentioned, not so cut and dry, I mean you had to see what the bloke had to go through to prove his residency and even appeal a previous ruling on his 2007 tax year.

 

As much as it is a long read, it is there to assist those who want to keep their residency status, i.e. what they need to have in place to give them a head start, because from my opinion, there are so many precedents it could go either way.

 

As for the fully franked dividends being a non resident and paying no tax, if they pulled this out there would be a major slump in the Australian Stock Market, and the reason they introduced this no tax on foreign residents if they invest in the stock market is to give companies a lift, when and if they ever wipe the no tax for foreign residents, plan B is already there, i.e. straight into term deposits living off my budget till I hit 101 years of age, as for the interest, well the kids can have that...lol

[Bikeman93]

Apparently you can stay out of the country and still retain tax residence as long as you don't spend most of that time in any 1 country. Meaning visiting 3 countries with no single 1 more than 183 days.

 

To simplify they class you as a non resident only when you live in any one country more than 183 days.

 

Makes the Elite or Retirement Visa less attractive.

[Will27]

31 minutes ago, Bikeman93 said:

Apparently you can stay out of the country and still retain tax residence as long as you don't spend most of that time in any 1 country. Meaning visiting 3 countries with no single 1 more than 183 days.

 

To simplify they class you as a non resident only when you live in any one country more than 183 days.

 

Makes the Elite or Retirement Visa less attractive.

Where did you hear, read or see that?

 

I doubt the ATO is going to ask to see your passport to determine

your residence status.

 

Sorry, but I can't see this being correct at all.

[Bikeman93]

5 minutes ago, Will27 said:

Where did you hear, read or see that?

 

I doubt the ATO is going to ask to see your passport to determine

your residence status.

 

Sorry, but I can't see this being correct at all.

https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=DORSLA&anchor=DORSLA/questions#DORSLA/questions

[Nakrob]

Where did you hear, read or see that?
 
I doubt the ATO is going to ask to see your passport to determine
your residence status.
 
Sorry, but I can't see this being correct at all.

I understood that part of the assessment of whether you remain a tax resident in Australia once you 'leave' is how permanent a move you make i.e. if you take family with you and purchase property in your new home country. I could see a scenario where you are transient in a number of countries, having left Australia, to the extent that you're still considered tax resident in Australia. This is just my thoughts not fact.

[Will27]

3 hours ago, Bikeman93 said:

https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=DORSLA&anchor=DORSLA/questions#DORSLA/questions

I guess that depends on how much honesty you want to provide.

 

For example: Are you an Australian resident who is emigrating to live permanently in another country?

For most people living in Thailand, that would mean yes. Tick yes and you're a non-resident.

 

Again, the vast majority of the Aussies living in Thailand would be classed as non-residents IMO.

[Stevemercer]

I'm a bit surprised by the above tool. I'm a retired Australian Public Servant, and on the CSS super scheme. According to the tool I am always an Australian resident for tax purposes no matter no long I live overseas!

 

 

 

[4MyEgo]

On 16/02/2018 at 2:22 PM, gearbox said:

Lots of useful info in the thread.

 

The data matching capabilities and the information exchange between the govt departments is not perfect yet, but is getting better and better. 

 

Did anyone try to move all of their assets to a tax friendly country like Singapore? AFAIK the tax is very low there on income from shares and capital gains, but seems to be difficult to open a bank account without employment pass.

A wealthy mate of mine said he opened up a trust in Singapore

[4MyEgo]

On 28/02/2018 at 8:23 PM, Bikeman93 said:

Apparently you can stay out of the country and still retain tax residence as long as you don't spend most of that time in any 1 country. Meaning visiting 3 countries with no single 1 more than 183 days.

 

To simplify they class you as a non resident only when you live in any one country more than 183 days.

 

Makes the Elite or Retirement Visa less attractive.

Scroll down to 26 then back to 23 this is the best guide for those seeking to retain their residency status, and I say, good luck, best read as this sums it up.

 

http://www.austlii.edu.au/cgi-bin/sinodisp/au/other/rulings/ato/ATOITR/1991/itr1991-2650/itr1991-2650.html?stem=0&synonyms=0&query=overseas abode

[4MyEgo]

On 19/02/2018 at 4:12 AM, ELVIS123456 said:

The statement above "The rules are pretty clear, i.e. if you are out of the country for more than 183 days in any "financial year" you are a non resident, unless you can prove otherwise...."  is correct in some, but not in all situations.  This is the wording from the relevant ATO site:

 

The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and don't need to apply any of the other residency tests.

If you don't satisfy the resides test, you'll still be considered an Australian resident if you satisfy one of three statutory tests:

• The domicile test: You're an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.
• The 183-day test: If you're actually present in Australia for more than half the income year, whether continuously or with breaks, you may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here.
• The superannuation test: This test ensures that Australian government employees working at Australian posts overseas are treated as Australian residents.

Who this section is meant to advise is the people who 'want' to be a non-resident for tax purposes.  If you are not a 'resident', then you can still be a resident for tax IF you satisfy one of the three tests - including being in Aust for net 183 or more days in any year - "unless your usual place of abode is outside Australia and you have no intention of taking up residence here."  This section is for people who are not resident in Aust and do not want to be a tax resident - if you are not in Aust for net 183 or more days then you are definitely a non-resident for tax.

 

You can be outside Aust for up to 2 years at a time, and still be considered a tax resident. After 2 years absence it becomes more problematic, but it is still possible to remain a resident for tax.  

 

https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/Residency-tests/

 

In my plans, I wish to remain a resident for tax purposes for many reasons, and being able to return for any serious medical issues using Medicare is just one of them.  Being a tax resident (and liable for the medicare levy if applicable) greatly assists in my plans. 

 

Hopefully 'they' wont close the loophole that allows non-residents to gain tax advantages through the use of franked dividend shares, for those undertaking that course of action, but it would be wise to have a Plan B if they do take that route. Likewise, those of us with other plans need Plan Bs and Cs if they decide to stop expats receiving the OAP when overseas and stop them getting Medicare immediately when they return.  

 

I don't know if you have read this one yet, but sending the link for you anyways.

 

23 to 26 is interesting: 

 

http://www.austlii.edu.au/cgi-bin/sinodisp/au/other/rulings/ato/ATOITR/1991/itr1991-2650/itr1991-2650.html?stem=0&synonyms=0&query=overseas abode

[4MyEgo]

On 28/02/2018 at 8:58 PM, Will27 said:

Where did you hear, read or see that?

 

I doubt the ATO is going to ask to see your passport to determine

your residence status.

 

Sorry, but I can't see this being correct at all.

I believe if you scroll down to 26 you can work out what they are saying, then back to 23.

 

This has a hell of a lot of interesting stuff in there for guys like us as knowledge is power.

 

http://www.austlii.edu.au/cgi-bin/sinodisp/au/other/rulings/ato/ATOITR/1991/itr1991-2650/itr1991-2650.html?stem=0&synonyms=0&query=overseas abode

[4MyEgo]

On 28/02/2018 at 9:22 PM, Nakrob said:

On 28/02/2018 at 8:58 PM, Will27 said:

Where did you hear, read or see that?
 
I doubt the ATO is going to ask to see your passport to determine
your residence status.
 
Sorry, but I can't see this being correct at all.

I understood that part of the assessment of whether you remain a tax resident in Australia once you 'leave' is how permanent a move you make i.e. if you take family with you and purchase property in your new home country. I could see a scenario where you are transient in a number of countries, having left Australia, to the extent that you're still considered tax resident in Australia. This is just my thoughts not fact.

Scroll down to 26 then back to 23, this should clarify a few issues:

 

http://www.austlii.edu.au/cgi-bin/sinodisp/au/other/rulings/ato/ATOITR/1991/itr1991-2650/itr1991-2650.html?stem=0&synonyms=0&query=overseas abode

[4MyEgo]

24 minutes ago, Stevemercer said:

I'm a bit surprised by the above tool. I'm a retired Australian Public Servant, and on the CSS super scheme. According to the tool I am always an Australian resident for tax purposes no matter no long I live overseas!

 

 

 

I don't know much about Australian Public Service and the CSS, but I know of a bloke who is paying tax as he is on the PSS, does that make any sense, I had a quick read on it, and I think it had to do with what year you took it or received it ? 

[Will27]

36 minutes ago, Stevemercer said:

I'm a bit surprised by the above tool. I'm a retired Australian Public Servant, and on the CSS super scheme. According to the tool I am always an Australian resident for tax purposes no matter no long I live overseas!

 

 

 

I don't think it's worded that well, but I'm pretty sure it means you have to be currently employed by the government.

[Will27]

24 minutes ago, 4MyEgo said:

I believe if you scroll down to 26 you can work out what they are saying, then back to 23.

 

This has a hell of a lot of interesting stuff in there for guys like us as knowledge is power.

 

http://www.austlii.edu.au/cgi-bin/sinodisp/au/other/rulings/ato/ATOITR/1991/itr1991-2650/itr1991-2650.html?stem=0&synonyms=0&query=overseas abode

Thanks for that.

Clear as mud really and so many things can be taken into account.

 

 

[Straight8]

On 2/14/2018 at 9:27 PM, 4MyEgo said:

but you have been living in Thailand for more than 183 days,

Is that within a calendar year or financial year?

[4MyEgo]

21 minutes ago, Straight8 said:

Is that within a calendar year or financial year?

From my understanding on the ATO's website, if I recall correctly it is 183 days within a financial year, this would be simply so they can work out your tax within the financial year, however I also did read a court case which said the 183 days was not a hard and fast rule.

 

Scroll down to 41 in the link below and have a read where a guy had two places, one in Australia and one overseas, but because he stayed in Australia for 183 days, he kept his residency.

 

http://www.austlii.edu.au/cgi-bin/sinodisp/au/other/rulings/ato/ATOITR/1991/itr1991-2650/itr1991-2650.html?stem=0&synonyms=0&query=overseas abode

 

26 and 23 are the main ones to consider, but everybody can have a good read through and confuse themselves, and remember, each time a decision is made, which is different to other court rulings, it sets a precedent in its self, which makes things even more confusing and there are scores of them 555

[Stevemercer]

I've done a bit more research which seems to confirm that retired Australian public servants (CSS or PSS members) remain Australian residents for tax purposes even if they live overseas for more than 6 months in any one tax year (see extract from case ruling referenced in a previous post below). This is a good situation for me.

 

This means they continue to pay normal Australian tax (including benefiting from the tax-free threshold). My previous fear was that I would become a 'non resident' for tax purposes, if I live in Thailand for more than 6 months in any one tax year. This means that I would lose the tax-free threshold and have to pay a flat tax of 32.5%. I would end up loosing thousands in tax, making it economically more difficult to live in Thailand.

 

3. An “Australian resident” means a person who is a resident of Australia for the purposes of the ITAA 1936. A “resident of Australia” is defined in s 6(1) of the
ITAA 1936 to mean:
(a) a person, other than a company, who resides in Australia and includes a person:
(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside
Australia;
(ii) who has actually been in Australia, continuously or intermittently, during more than one half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or
(iii) who is:
(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990 (PSS); or
(B) an eligible employee for the purposes of the Superannuation Act 1976 (CSS); or
(C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B);

 

An eligible employee is someone contributing to, or being paid a pension from, the CSS.

[vincent13]

Hope you're correct Steve as I'm a CSS pensioner also.

Where did you source the info in orange above?