Investing money in Australian bank, non resident for tax purposes

[Kenny202]

I am wanting to invest some money in an Australian bank which has particularly good interest rates atm, but they and many other banks discourage investment from Australians living overseas. I am an Australian citizen but been out of the country more than 2 years and my accountant has declared me a non resident for tax purposes (had no choice but to do this a couple years back or face a huge back tax bill)

 

Normally with a bank you can declare yourself a non resident and pay a flat rate of 10% on interest earnings but this bank wont have a bar of it. You need an Australian number, residential address etc. 

 

Does anyone know if I invested the money with them and did my own tax return as a non resident if I will still only be liable for the flat rate of 10% or will I be up for full non resident tax rates (34%) on my interest?

[KhunHeineken]

In relation to 10% tax on interest earned in Australian bank accounts, maybe you are referring to this:

 

Bank accounts held by foreign residents

Financial institutions automatically withhold tax from interest earned on accounts held by foreign residents.

If you've given the financial institution your overseas address, the tax will be withheld at the rate of 10%. Without your overseas address, tax is withheld at 47%.

You don't include this interest as income on your Australian tax return.

I was under the belief this was for foreign residents who do not hold Australian citizenship, or Permanent Residency, and who do not live in Australia. 

 

If you do not declare your Tax File Number (TFN) to your bank, the interest is taxed at the highest marginal rate, which is around 47%. 

 

If you do declare your tax file number, but are a non resident for taxation purposes, tax starts at 32.5% from $0 to $120,000. 

 

Foreign resident tax rates 2022–23

Foreign resident tax rates 2022–23

Taxable income	Tax on this income
0 – $120,000	32.5 cents for each $1
$120,001 – $180,000	$39,000 plus 37 cents for each $1 over $120,000
$180,001 and over	$61,200 plus 45 cents for each $1 over $180,000

 

If you are a resident, and declare your TFN,  your interest is taxed at resident rates, along with other income.  

 

Resident tax rates 2022–23

Resident tax rates 2022–23

Taxable income	Tax on this income
0 – $18,200	Nil
$18,201 – $45,000	19 cents for each $1 over $18,200
$45,001 – $120,000	$5,092 plus 32.5 cents for each $1 over $45,000
$120,001 – $180,000	$29,467 plus 37 cents for each $1 over $120,000
$180,001 and over	$51,667 plus 45 cents for each $1 over $180,000

[Kenny202]

If you've given the financial institution your overseas address, the tax will be withheld at the rate of 10%. Without your overseas address, tax is withheld at 47%

 

That is what I am referring to, unfortunately the particular bank I am dealing with (U bank) wont have a bar of it. And you can't pay it yourself. Already checked with my account she said definitely taxed at full rates if declared on tax return. But then I called ATO and they didn't seem to have a clue. I thought they were casual here. So unprofessional. In the end ATO said I could pay 10% on my tax return but they couldn't seem to understand the bit about non resident for tax purposes. And that was my third try with 3 different people. I would probably trust my accountant over the numpties I spoke to at the tax office....she was pretty definite about it

 

Interesting though in the information you posted it sounds like all you have to do is give the bank your overseas address and tax file number, which I can probably change online....just edit it. Doesn't look like they have to agree to accept me as a non resident or anything. If they withheld more than the 32% tax looks like I would be within my rights to challenge it.

[KhunHeineken]

On 3/16/2023 at 9:56 AM, Kenny202 said:

If you've given the financial institution your overseas address, the tax will be withheld at the rate of 10%. Without your overseas address, tax is withheld at 47%

 

That is what I am referring to, unfortunately the particular bank I am dealing with (U bank) wont have a bar of it. And you can't pay it yourself. Already checked with my account she said definitely taxed at full rates if declared on tax return. But then I called ATO and they didn't seem to have a clue. I thought they were casual here. So unprofessional. In the end ATO said I could pay 10% on my tax return but they couldn't seem to understand the bit about non resident for tax purposes. And that was my third try with 3 different people. I would probably trust my accountant over the numpties I spoke to at the tax office....she was pretty definite about it

 

Interesting though in the information you posted it sounds like all you have to do is give the bank your overseas address and tax file number, which I can probably change online....just edit it. Doesn't look like they have to agree to accept me as a non resident or anything. If they withheld more than the 32% tax looks like I would be within my rights to challenge it.

Say an Aussie had $2 million AUD in an Aussie bank earning 5%.  That's $100,000AUD a year, and this was their only income.  I would find it hard to believe they could ring their bank and give them an address in Thailand and go from being taxed as per the above table, to being taxed a flat 10%.

 

Let's say that Aussie was still in Australia, using the "gray area" but in reverse, arguing that they actually live in Thailand, but are just on a long holiday in Australia visiting friends and family. 

 

I would be surprised if it was that easy to get out of paying all that tax.

 

If there was other income involved, I would think as so as you give your bank an overseas address to claim your 10%, the ATO would be on you for their 32.5% as a non resident for tax purposes on your next tax return.

 

Next time I am speaking with my accountant I will ask them about this as an option for when if / when the proposed changes to non resident tax comes in.  

 

One option I have was to liquidate every asset I have in Australia and move the money offshore, out of reach of the ATO.  I would still be a non resident for tax purposes, being outside of Australia for 183 days, but I have nothing in Australia to tax.  

 

I could handle a flat 10% tax on interest, so leaving it in an Aussie bank, and telling them I am a non resident for tax purposes, could be an option. 

[Kenny202]

4 hours ago, KhunHeineken said:

Say an Aussie had $2 million AUD in an Aussie bank earning 5%.  That's $100,000AUD a year, and this was their only income.  I would find it hard to believe they could ring their bank and give them an address in Thailand and go from being taxed as per the above table, to being taxed a flat 10%.

 

Let's say that Aussie was still in Australia, using the "gray area" but in reverse, arguing that they actually live in Thailand, but are just on a long holiday in Australia visiting friends and family. 

 

I would be surprised if it was that easy to get out of paying all that tax.

 

If there was other income involved, I would think as so as you give your bank an overseas address to claim your 10%, the ATO would be on you for their 32.5% as a non resident for tax purposes on your next tax return.

 

Next time I am speaking with my accountant I will ask them about this as an option for when if / when the proposed changes to non resident tax comes in.  

 

One option I have was to liquidate every asset I have in Australia and move the money offshore, out of reach of the ATO.  I would still be a non resident for tax purposes, being outside of Australia for 183 days, but I have nothing in Australia to tax.  

 

I could handle a flat 10% tax on interest, so leaving it in an Aussie bank, and telling them I am a non resident for tax purposes, could be an option. 

But it states very clearly if you are an Australian citizen, and non resident for tax purposes providing you supply your bank with a tax file number and O'seas address with holding tax is 10%. It doesn't make a lot of sense to me either but do you agree that is the case?

 

As for not supplying a tax file number, I though every bank account opened in at least the last 20 years it was mandatory to supply a tax file number? 

[KhunHeineken]

On 3/18/2023 at 3:47 AM, Kenny202 said:

But it states very clearly if you are an Australian citizen, and non resident for tax purposes providing you supply your bank with a tax file number and O'seas address with holding tax is 10%. It doesn't make a lot of sense to me either but do you agree that is the case?

 

As for not supplying a tax file number, I though every bank account opened in at least the last 20 years it was mandatory to supply a tax file number? 

This is what it says:

 

"Financial institutions automatically withhold tax from interest earned on accounts held by foreign residents."

 

Where do you get "Australian citizen" from?

 

You very well could be right, and it is Australia foreign resident for taxation purposes, but it could be a foreigner, as in, not an Australian citizen.  

 

Like I said, I would be surprised if it was that easy to get out of paying all that tax.