Australian becoming a NON Resident for tax purposes

[1]

I'm an Australian resident currently residing in Thailand. Before I left Australia I did their tax wizard to determine my residency and for five year period I'm considered an Australian Resident for tax purposes. In the near future this is going to change and I will become a NON Resident for tax purposes and I want to be in the best position possible when that time comes. I did a fair bit of research regarding this prior to my departure from Australia as I have a number of considerations with regards to Investments. But as anybody that has been through this recognizes that its far from clear cut.

 

So the Investments that I have in Australia are shares, a rental property and my own personal home and my preference would to be to continue to derive my income from Australia which is currently the case. I am aware that there is a change potentially happening regarding the sale of your personal home that I think is being discussed in Parliament now but I don't want to really include this as part of my question as currently it is an unknown.

 

I guess I'm after Australians that have been through this with either shares or property or both and what they learned along the way. It's obviously very complex so I'm not expecting comprehensive answers but I am hoping to hear from anybody who has been through the same process and what they did and what they would possibly do differently.

 

Thanks in Advance

[BestB]

Australian government recently tightened up all the laws in this regard and not in our favor.

 

the only way to stay resident for tax purposes is to return back to Oz frequently or to spend more time in Oz .

 

i remember doing a post on the very same subject, got a letter from westpac confirming I am no longer resident and applying new tax rates. 

[legend49]

19 hours ago, BestB said:

Australian government recently tightened up all the laws in this regard and not in our favor.

 

the only way to stay resident for tax purposes is to return back to Oz frequently or to spend more time in Oz .

 

i remember doing a post on the very same subject, got a letter from westpac confirming I am no longer resident and applying new tax rates. 

Bad enough not to qualify for aged pension while living in SE Asa now the a-holes want more blood. I had my Oz bank in Perth challenge me on this subject of non residence status. So I used my mates address in perth and made up a phone number; obviously they just fill in a form and no one checks it. Only assets I have are defence pensions paid into that bank; because government agencies will not pay into a Thai bank account.

[ThaiBunny]

19 hours ago, BestB said:

the only way to stay resident for tax purposes is to return back to Oz frequently or to spend more time in Oz

Rubbish. The Tax Office position, supported by the Australia-Thailand Double Tax Treaty is that if you are receiving income from Australia then you are automatically and forever a tax resident of Australia. Where you are ordinarily resident is completely and utterly irrelevant. The tests that some bush lawyers here rely on to "prove" their status are designed for those who claim not to be tax resident in Australia but tax resident somewhere else and ignore completely the fact that the Tax Treaty even exists. Relying on some "tax wizard", one-size-fits-all is not a definitive tax ruling. I've got one and that's what it says (and no, I'm not going to share it with anyone)

[BestB]

3 minutes ago, ThaiBunny said:

Rubbish. The Tax Office position, supported by the Australia-Thailand Double Tax Treaty is that if you are receiving income from Australia then you are automatically and forever a tax resident of Australia. Where you are ordinarily resident is completely and utterly irrelevant. The tests that some bush lawyers here rely on to "prove" their status are designed for those who claim not to be tax resident in Australia but tax resident somewhere else and ignore completely the fact that the Tax Treaty even exists. Relying on some "tax wizard", one-size-fits-all is not a definitive tax ruling. I've got one and that's what it says (and no, I'm not going to share it with anyone)

I suggest you educate yourself prior to posting utter rubbish 

[simple1]

28 minutes ago, legend49 said:

government agencies will not pay into a Thai bank account.

Just to clarify, as an example, those who meet the criteria for Off Shore payment of the Age Pension can nominate a Thai Bank and are paid based on the exchange rate from the Reserve Bank of Australia.

 

https://www.humanservices.gov.au/individuals/services/centrelink/age-pension/managing-your-payment/if-you-travel-outside-australia/pension-rates-payable-outside-australia

[steven100]

There are answers to your questions on the ATO website.  If you depart Australia with the intention of permanently residing overseas then you may be deemed an Australian non-resident for tax purposes, in which case there is a specific tax rate applied depending on your assets and annual income.

[Bluetongue]

4 minutes ago, simple1 said:

Just to clarify, as an example, those who meet the criteria for Off Shore payment of the Age Pension can nominate a Thai Bank and are paid based on the exchange rate from the Reserve Bank of Australia.

 

https://www.humanservices.gov.au/individuals/services/centrelink/age-pension/managing-your-payment/if-you-travel-outside-australia/pension-rates-payable-outside-australia

I think this poster mentioned a Defence Pension which would come from Comsuper. They require an Australian bank account.

[Brickbat]

It’s very clear cut. After a 2 year grace period, if you are out of the country for more than 6 months and 1 day, you are a non resident for tax purposes. 

And as such, personal tax is much higher than a resident , but income earned from interest is just a 10% tax. 

 

Anyone that craps on about cheating the system is in for some curry. They know from your passport which is linked to most govt depts. 

[bmanly]

What happens if all your savings are in a super account and you are over 60 y/o? There is no tax on Super Pensions when you are over 60. So can you draw that Super Pension for the rest of your life and live in Thailand with no complications?

[Blackheart1916]

Wow you really came to the wrong place to get complex answers to serious questions. 

[Thaidaddy]

I am a non-resident of Australia (for tax purposes). What I can tell you is that I can invest in Australian shares and pay no capital gains, but should such shares get a dividend payment then it will be taxed at the highest marginal rate. This same concept will apply if you are renting your house or earning any income in Oz. With this in mind it may well be better for you to remain a tax resident of Australia simply so that you get the step up approach to taxation. Obviously all depends on the amount of investment income you earn. Any Oz pension is not taxable in Thailand.  

[TigerandDog]

2 hours ago, simple1 said:

Just to clarify, as an example, those who meet the criteria for Off Shore payment of the Age Pension can nominate a Thai Bank and are paid based on the exchange rate from the Reserve Bank of Australia.

 

https://www.humanservices.gov.au/individuals/services/centrelink/age-pension/managing-your-payment/if-you-travel-outside-australia/pension-rates-payable-outside-australia

partly true, but definitely WRONG with regards to exchange rate from the RBA.  Centrelink (Human Services) use Citibank as their official departmental bank, and despite the web site saying they use RBA exchange rates, they use Citibank exchange rates, and Citibank skim big time on the rates for their own profit.  I've had lengthy emails and telephone conversations with Human Services over the exchange rate issue, and it wasn't until I provided them with a spreadsheet showing how much I was receiving, and compared the Aged Pension payment using both the RBA exchange rate & the rate I was actually being paid at, that someone actually got off their backside and investigated. That was when the information about using the Citibank exchange rate came to the surface.  They did promise to remove the reference to the RBA exchange rate from their web site, but that obviously hasn't happened.

 

 

[OzMan]

I am in the same position. I phoned Centrelink and asked how long I needed to be out of the country before I was deemed a non-resident for pension purposes. They said that there was not a specified time but they generally took two years from first leaving to be the cut off to being a resident. I believe I can return every six months for two years and still be classed as a resident, after that I need to remain in Australia for six months and 1 day every year to remain a resident. My big problem is that because I am selling my home my assets take me well above the level to get a pension. If I were to remain in Australia and buy a new family home the home would not be included with my assets. If I were to buy a condo to live in in BKK Centrelink will regard the condo as an income producing asset and still not give me a pension.

[LivinLOS]

2 hours ago, ThaiBunny said:

Rubbish. The Tax Office position, supported by the Australia-Thailand Double Tax Treaty is that if you are receiving income from Australia then you are automatically and forever a tax resident of Australia. Where you are ordinarily resident is completely and utterly irrelevant. The tests that some bush lawyers here rely on to "prove" their status are designed for those who claim not to be tax resident in Australia but tax resident somewhere else and ignore completely the fact that the Tax Treaty even exists. 

Partly true.. Yes you are tax resident, but only for the domestic sourced income.. 

 

Being not ordinarily resident means your non domestic sourced income is (likely) treated differently. 

[GreasyFingers]

I have been living here for 6 years and submit a tax return every year through my accountant and have not had a problem. As others have said this may be illegal but who is to know until the tax office says something.

The statement above that everything in the government is linked is not necessarily true, or maybe not checked. I do not get the age pension, after 3 appeals, because Centrelink deem me to be a non resident but the tax office has not picked up on this.

[Mick501]

I've done a lot of research on this recently.  There are no hard and fast rules on exactly what makes you become a non resident, however there is case precedent around it.  Generally it is related to severing of ties in Australia, and establishment of ties in a new place.  

 

If you are deemed non resident, then firstly you lose your tax free threshold, so that you will be taxed at 30% from your first dollar, and then a sliding scale.

 

Superannuation generally stays the same unless you have a SMSF.

 

Investment properties can be subject to land tax, depending on which state.  Queensland is by far the most punitive, and you really need to consider selling if you have property there.

 

there is proposed legislation before the senate about removing the CGT exemption on your principal place of residence.  This has been passed by the house of reps, but has stalled in the senate for nearly a year.  Latest indications are there is bi-partisan support in the senate that this will NOT go ahead.

[StevieAus]

1 hour ago, bmanly said:

What happens if all your savings are in a super account and you are over 60 y/o? There is no tax on Super Pensions when you are over 60. So can you draw that Super Pension for the rest of your life and live in Thailand with no complications?

Exactly but the poster has other assets which may attract tax

[MikeN]

OP, while you own a home in Australia, if you are not working here  and earn all your income in Australia then you have a tangible and continuing attachment to Australia so you will not necessarily be a non resident for tax purposes unless you start the process. If you do become a non resident by choice for some strange reason you will be taxed from the very first dollar you earn, no threshold exemption.

 My advice would be to go back to Oz regularly, preferably around August so you can do your tax return using an Australian residential address even if it is just the street address of a hotel, the ATO will be none the wiser. Or even better, use a tax agent so that they know you are physically in the country. Believe me, the cost of hotel and airfares will be less than what you save by continuing to be a tax resident.

 

[StevieAus]

7 minutes ago, GreasyFingers said:

I have been living here for 6 years and submit a tax return every year through my accountant and have not had a problem. As others have said this may be illegal but who is to know until the tax office says something.

The statement above that everything in the government is linked is not necessarily true, or maybe not checked. I do not get the age pension, after 3 appeals, because Centrelink deem me to be a non resident but the tax office has not picked up on this.

I think you are correct there Centrelink seem to be linked to the Immigration system as I know a couple of friends resident in Aus who over the years have had certain benefits automatically reduced for periods they were overseas.

[simple1]

40 minutes ago, TigerandDog said:

partly true, but definitely WRONG with regards to exchange rate from the RBA.  Centrelink (Human Services) use Citibank as their official departmental bank, and despite the web site saying they use RBA exchange rates, they use Citibank exchange rates, and Citibank skim big time on the rates for their own profit.  I've had lengthy emails and telephone conversations with Human Services over the exchange rate issue, and it wasn't until I provided them with a spreadsheet showing how much I was receiving, and compared the Aged Pension payment using both the RBA exchange rate & the rate I was actually being paid at, that someone actually got off their backside and investigated. That was when the information about using the Citibank exchange rate came to the surface.  They did promise to remove the reference to the RBA exchange rate from their web site, but that obviously hasn't happened.

 

 

I get my UK Pension payment via Citibank, shows in payment info.

[Monkeyrobot]

Also remember if you are a non resident you loose your Medicare entitlements so if you get sick and go back to Oz for treatment you could have problems. 

[madmen]

13 minutes ago, Monkeyrobot said:

Also remember if you are a non resident you loose your Medicare entitlements so if you get sick and go back to Oz for treatment you could have problems. 

good point. Medicare expires after 5 years. Not could but will have problems until establishing residency again usually 6 months

[oznomad]

Wow. So much absolute rubbish in some of the replies. How some people form their opinions is bewildering. Facts just seem irrelevant.

I suggest the OP refer to the ATO site. A lot of info is tucked away apart from the main page which discusses the 183 day test, domicile test, resides test, super test etc.

Keep looking and all shall be revealed.

A link that may benefit.

https://www.exfin.com/australian-tax-residency

 

And a list of contemplation points, from the ATO site.

 

Where you have left Australia

• which country or countries you are a citizen of
• whether you have been granted permanent residency by any country, and if so, which country and when was it granted
• your country of origin (the country you were born in or the country of nationality you acquired at birth)
• where you were living on a permanent basis prior to your departure
• the date you departed Australia
• your destination overseas – if more than one country, details of each
• the type of visa you had to enter the overseas country
• whether the visa allows you to stay permanently
• the purpose of your overseas visit
• your long term residency intentions (for example, do you intend to reside overseas permanently)
• when you formed the intention to make your home indefinitely outside Australia
• when you plan to return to Australia
• whether you hold a return airline ticket, and if yes, a copy
• whether you have come back Australia since first leaving Australia, and if so  
  • the dates of your arrival in and departure from Australia
  • the purpose of the visit
  • provide a copy of passport showing entry and exit stamps
• whether you have a place to live overseas and if so
  • where this is
  • whether you are staying with relatives or friends
  • are renting or have purchased a home
  • if it is provided by an overseas employer
  • provide evidence of this residency with your name and the address on it (for example, the lease agreement)
• what assets you have overseas (for example, investments, motor vehicle, household effects, property, or bank accounts
• where you lived in Australia prior to leaving (for example, whether you were renting, staying with relatives or friends, or owned a home)
• if you have a place to live in Australia, and if so, whether this is being rented out while you are residing overseas
• whether you have any assets in Australia (for example, investments, motor vehicle, household effects, property, or bank accounts
• what you did with your household effects in Australia
• whether you are receiving income from Australian sources, and if so, details
• whether you have employment overseas, and if so  
  • the employer's name
  • how long the employment is for
  • if not ongoing, whether the employment could be extended and, if so, for how long
  • provide a copy of your employment contracts
• whether you still have a position or job being held for you in Australia and if so, details (for example, whether you are on leave without pay)
• whether your family (children, spouse, partner) accompanied you overseas, and if so  
  • which family members
  • their ages
  • where they were living while overseas
• if your family has not accompanied you overseas, why
• what social and sporting connections you have with Australia
• what social and sporting connections you have with the overseas country
• whether your spouse was a citizen or permanent resident of the overseas country
• whether you or your spouse were a Commonwealth Government of Australia employee for superannuation purposes, and if so  
  • the employment periods
  • the type of employment
  • the name of the superannuation funds of which you and/or your spouse were a member
  • if you or your spouse still hold a position with the Commonwealth Government of Australia and remain eligible to contribute to the superannuation fund
• whether you advised the Australian Electoral Office to have your name removed from the electoral roll
• whether you advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax could be deducted
• whether you advised any Australian companies with whom you have investments that you are a foreign resident
• whether you advised Medicare or your health insurance provider to have your name removed from their records
• whether you have lodged tax returns in any other countries, and if so, details and copies of assessments of tax
• what you stated as the reason for going overseas when completing the Australian Immigration Outgoing passenger card
• whether you had a capital gains tax event I1 happen to your assets because you ceased to be an Australian resident.

[LosLobo]

1 hour ago, Monkeyrobot said:

Also remember if you are a non resident you loose your Medicare entitlements so if you get sick and go back to Oz for treatment you could have problems. 

What has being a non resident for tax purposes have to do with being a non resident for social security purposes?

 

[1]

48 minutes ago, oznomad said:

Wow. So much absolute rubbish in some of the replies. How some people form their opinions is bewildering. Facts just seem irrelevant.

I suggest the OP refer to the ATO site. A lot of info is tucked away apart from the main page which discusses the 183 day test, domicile test, resides test, super test etc.

Keep looking and all shall be revealed.

A link that may benefit.

https://www.exfin.com/australian-tax-residency

Thanks I I've been a bit busy today and haven't had a chance to look at everything in detail here on the thread.

 

Just for the record I'm not interested in pensions etc.

 

I have already started my investigations on the ATO website but I wanted to get some feedback hopefully from people that have been through this experience. Because in my experience technical reading and on the ground experience can be quite different.

 

Like I said thanks to all that have left feedback and I'll get more involved tomorrow.

[CygnusX1]

Brickbat posted -

“It’s very clear cut. After a 2 year grace period, if you are out of the country for more than 6 months and 1 day, you are a non resident for tax purposes. “

Actually, it’s the antithesis of very clear cut. In fact, the ATO as good as says that even it doesn’t fully understand its own legislation, and marginal cases can depend upon a detailed analysis of previous court decisions.

The 183 day period is just one of several tests the ATO uses to determine tax residency - see oznomad’s post. If you can prove a clear and continuing connection to Australia, you could be absent more than 183 days a year for many years and might still be a resident for tax purposes. Spending at least some time in Australia each year in the same home would help. Some wealthy individuals with large share portfolios can benefit from being a non resident for tax purposes, but they’d have to do more than just being absent from Australia for more than 183 days a year to satisfy the ATO of their non residency.

[Will27]

4 hours ago, GreasyFingers said:

I have been living here for 6 years and submit a tax return every year through my accountant and have not had a problem. As others have said this may be illegal but who is to know until the tax office says something.

The statement above that everything in the government is linked is not necessarily true, or maybe not checked. I do not get the age pension, after 3 appeals, because Centrelink deem me to be a non resident but the tax office has not picked up on this.

IMO, you're pretty much a non-resident for tax purposes.

 

The reason the ATO haven't done anything is because our system is based on self assessment.

[zaZa9]

5 hours ago, Brickbat said:

It’s very clear cut. After a 2 year grace period, if you are out of the country for more than 6 months and 1 day, you are a non resident for tax purposes. 

And as such, personal tax is much higher than a resident , but income earned from interest is just a 10% tax. 

 

Anyone that craps on about cheating the system is in for some curry. They know from your passport which is linked to most govt depts. 

Im not disputing what you assert , but would appreciate it if you could show me this law.

 

My ( aging ) and highly qualified accountant told me 11 years ago when I moved here to LOS  , that he actually had to submit paperwork to assert that his client , ie , "me" ,  wished to be considered a "Non Resident for Tax Purposes " - then  urged me to not do it.

He said , "My observations over 40 years is that the Australian Government always want

more tax payers on their books - not less. Unless you are in some Corporate situation , I wouldnt recommend it.. It will cost you way more than you save ."

At that stage I owned my own home , and had small investments in shares and super.

 

And  he also  advised ,  whatever I do , for then ,  or forever if I didnt want to change my status  ,  to never tick any  box saying Im returning to Aus "Temporarily"  ( which he recommended I do yearly - mainly for Medicare ) , or ever state   anything other than Im on an extended holiday. He said , "Youve retired , you are SELF FUNDED , do what you want. There is no law that says you have to stay anywhere for any time."

 

And this sounds like the ops situation - he simply has to pay any taxes due on his 'profits' , and go on an extended "holiday".

So Im interested to see evidence , 'Clear ' evidence  from Brickbat or anyone ... back then it wasnt 'automatic' that you were considered a NRfTaxP... if you went travelling.

 

Of course ,  if you are receiving government stipends ,  like a pension , any Government can dictate the conditions in which you will receive them. ie "6 months and 1 day in Aus".  And change them at will ( as the Aus Gov seems to like to do.)

 

Given the Australian Governments  seemingly negative attitude  to its citizens retiring O/S , I have no idea why a recipient of an Aus pension would insist it be paid to an O/S account , and not take the 'quiet' path and get it sent to an Aus account , then transfer it  on-line to  wherever they are "holidaying"  ( extensively ) !

( Its beside the point , but I also have no idea why the Aus Gov. isnt REALLY happy that retirees arent all living O/s - just think of the savings in pensioner services , it would be huge !)

 

Things change , I sold the house , and converted everything to Super ( as I was permitted to do between aged 57 to 60 - up to $540k aud one off deposit plus anything already put in... tax paid on the way on what was already there.)

Ive lived off my savings these 11 years in Thailand at around $40k aud a year  ( btw ,  an Aus Bank  gave me 6% fixed  back then in 2008  )  , and now Im 61 and 1 years savings left to spend ( at the current 1.7% for the last 3 years  it went down quick ..555)

 

So I returned home recently , and clarified with my NSW Super that I can draw what I want to draw ,  Tax Free , since Im over 60 ,  and they confirmed that ,  but  said it has to be sent  to an Australian Bank Account  , and asked , "You said you've been O/S for an extended period , we need to know if you  live  overseas  OR are still  registered as an Australian resident  for tax purposes , and still consider yourself a Resident of Australia  ... ahmm , sorry , there are tax implications  if you are not .." 

I answered that I was enamoured with travel , but considered Aus my home.

She confirmed my address and phone number ( my mates home address  since I left )  and gave me the forms to apply for payments , PLUS ( and this may be important as they are not so easy to get in LOS  ) , a JPs 'attestment' as to my ID.

I was also told to get a bank statement from my Aus bank , which I did and was free over the counter ,  - and submit this , the JPs paper  , and the application form ,  BY POST , and my money would go to that  Australian Bank.

Where I transferred it thereafter I consider  my business.

 I feel Im ok...

 

My view on the ops info is that he has even less tenuous links to the Australian Taxation system than I do.

He pays his taxes  ( including his Medicare Levy ) and  he goes on long holidays . He 'votes' on line ...  He keeps receipts ( as I still do ) from any hotel anywhere he stays in Asia , and NEVER states on any form he is living anywhere other than Australia...

 

Of course , if anyone can show us the law that Brickbat says is very 'clearcut' , then the op goes back for a few days every 6 months , and he may well need to , in order to take care of two properties...

 

[MikeN]

As said above, the criteria are far from clear cut, and the ATO could cherrypick what they want if they wanted to bother. What my accountant told me was that they are not really interested in pensioners continuing as tax residents when they might not really be, but are worried about people claiming to be non residents to avoid paying Australian tax. More upside in the latter for them ! Nobody is going to shed tears for a millionaire who gets caught trying to evade taxes, but going after pensioners for a (relatively) few dollars extra tax is not going to win the ATO any friends.