To be an Aussie non-resident for Tax, or not?

[Pattaya57]

I have a number of friends who would fight to the death to keep their 'Australian resident for tax' status, when clearly living retired in Thailand for 2-5 years in their Condo with a Thai wife and children in school is not in line with being an Aussie tax Resident.

The main reason given was they wanted to keep the tax free threshold a resident gets, however this is not always the best choice.

As an example, for someone that earns $45k bank interest in Australia here is resident tax vs non-resident tax (using the new 2024/25 tax rates of 16% between $18200 and $45000)

Resident
$18,200 - tax free
$26,800 @ 16% = $4288
$45,000 @ 2% medicare = $900
Total Tax = $5188

Non-resident
$45,000 @ 10% = $4500

Note 1: $36,400 bank interest has exactly the same $3640 tax as a resident or non-resident

Note 2: a resident is taxed at 32% (with medicare) for every $ over $45k, vs only 10% for non-resident, so this becomes an even easier choice.

I know other examples are better as resident, but I'm just pointing out that being a non-resident for tax is not always the bad thing that some people believe.

 

[Pattaya57]

Oh I should add, unbelievably in the year you elect to be a non-resident the ATO still gives you a minimum $13,464 tax free + $395 for every month you're a resident in that year. So if you elect 10th October you will have $15,043 tax free threshold (instead of $18,200 for full tax year)

I will be electing October for Non-resident status to use that $15k tax free threshold while the other 8 months Interest will be at only 10% instead of 18% or 32% (with medicare)

[georgegeorgia]

As far as I know when I retire in my not taxed on my  Super .

 

[Pattaya57]

14 minutes ago, georgegeorgia said:

As far as I know when I retire in my not taxed on my  Super .

 

Correct, if retired and over 60 taking a Super pension you are not taxed on that pension as a resident or non-resident.

 

A lot of people will have other income that is taxed though so need to decide which status

 

[Fat is a type of crazy]

I have a defined benefit super which is a bit different. It has little tax if resident but as far as I can tell a lot more if non resident so it is a big deal. 

[Pattaya57]

26 minutes ago, Fat is a type of crazy said:

I have a defined benefit super which is a bit different. It has little tax if resident but as far as I can tell a lot more if non resident so it is a big deal. 

I also have a defined benefit Super pension which I have been getting since age 55. 18.2% of the pension is currently tax free but I pay tax on the rest. They told me it's zero tax when I turn 60 just like normal Super?

[Fat is a type of crazy]

Just now, Pattaya57 said:

I also have a defined benefit Super which I have been getting since 55. I pay tax on it currently but they told me it's zero tax when I turn 60 just like normal Super?

In my case - a federal employee -   at 60 I'll pay a bit of tax because some bits are still taxable but there is the special tax offset they brought in for defined benefit recipients. But if I was a non resident you lose the tax free threshold and I am not sure if the tax offset still applies. Hard to find something clear on it but I recall one poster here noting he pays a decent amount of tax.  

[georgegeorgia]

12 minutes ago, Fat is a type of crazy said:

20 minutes ago, Pattaya57 said:

turn 60 just like normal Super

In my case - a federal employee

 

Federal employee?

So in other words you didn't work a day in your life 

[Pattaya57]

17 minutes ago, Fat is a type of crazy said:

In my case - a federal employee -   at 60 I'll pay a bit of tax because some bits are still taxable but there is the special tax offset they brought in for defined benefit recipients. But if I was a non resident you lose the tax free threshold and I am not sure if the tax offset still applies. Hard to find something clear on it but I recall one poster here noting he pays a decent amount of tax.  

Mine is Dept of Defence. I took pension 3 years ago but now remember there were 3 components. One was 18.2% tax free immediately at 55, one other was fully taxable until 60 when it became tax free and 3rd component had the 15% tax offset. I have some research to do.

[Pattaya57]

10 minutes ago, georgegeorgia said:

 

Federal employee?

So in other words you didn't work a day in your life 

Please go away with comments like that

[Fat is a type of crazy]

19 minutes ago, Pattaya57 said:

Mine is Dept of Defence. I took pension 3 years ago but now remember there were 3 components. One was 18.2% tax free immediately at 55, one other was fully taxable until 60 when it became tax free and 3rd component had the 15% tax offset. I have some research to do.

Not sure if Defence has the same super as the normal PSS  - had a feeling there's might be separate - but the PSS call centre have been helpful for me on working out the exact tax when I hit 60. There is an Ultimate PSS series on youtube of around 50 videos which talks about everything from continuing to contribute for tax deductions even after you have stopped working to creating annuities etc. But nothing I found on non residency and how it works for that. 

[still kicking]

1 hour ago, Pattaya57 said:

Please go away with comments like that

Give him a break he is a floor Cosmetica 

[metisdead]

A baiting troll post contravening our Community Standards and a reply has been removed.

[Pattaya57]

9 hours ago, Fat is a type of crazy said:

In my case - a federal employee -   at 60 I'll pay a bit of tax because some bits are still taxable but there is the special tax offset they brought in for defined benefit recipients. But if I was a non resident you lose the tax free threshold and I am not sure if the tax offset still applies. Hard to find something clear on it but I recall one poster here noting he pays a decent amount of tax.  

 

I checked my Commonwealth Super defined benefit statement and it has three components, 1. Tax Free, 2. Taxable Taxed and 3. Taxable untaxed. At 60, the first 2 components are tax free, while the 3rd Component is Taxed at 10% less than my marginal tax rate.

If I'm a non-resident that would be 30% marginal tax rate minus 10% = 20% tax on Component 3 only

If resident, marginal tax rate would be 0% if assessible income < $18,200, 16% if between $18,200 and $45,000 and 30% if > $45,000, so component 3 tax rate would either be 0%, 6% or 20%

Every person will have a different ratio, but mine is 1. Tax free - 18.2%, 2. Taxable Taxed - 25.8%, 3. Taxable Untaxed - 56.0%

So as non-resident I would have 20% tax to pay on 56% of my pension, which is equivalent to 11.2% on my whole pension. Note this is same amount I'd pay as Resident with assessible income >$45,000 (but would also have to pay 2% Medicare)

 

[Fat is a type of crazy]

9 minutes ago, Pattaya57 said:

 

I checked my defined benefit statement and it has three components, 1. Tax Free, 2. Taxable Taxed and 3. Taxable untaxed. At 60, the first 2 components are tax free, while the 3rd Component is Taxed at 10% less than my marginal tax rate.

If I'm a non-resident that would be 30% marginal tax rate minus 10% = 20% tax on Component 3 only

If resident, your marginal tax rate would be 0% if < $18,200, 16% if between $18,200 and $45,000 and 30% if > $45,000 so component 3 tax rate would either be 0%, 6% or 20% (mine would be 20%)

Every person will have a different ratio, but mine is 1. Tax free - 18.2%, 2. Taxable Taxed - 25.8%, 3. Taxable Untaxed - 56.0%

So as non-resident I would have 20% tax to pay on 56% of my pension, which is equivalent to 11.2% on my whole pension. Note this is same amount I'd pay as Resident with assessible income >$45,000 (but would also have to pay 2% Medicare)

 

That's a good summary. Maybe I'm thinking too much but I wasn't sure that the 10 per cent tax offset would necessarily apply to a non-resident. Probably does. 

[Fat is a type of crazy]

51 minutes ago, Fat is a type of crazy said:

That's a good summary. Maybe I'm thinking too much but I wasn't sure that the 10 per cent tax offset would necessarily apply to a non-resident. Probably does. 

Looks like not a concern re 10 per cent and non-residents. https://community.ato.gov.au/s/question/a0J9s0000001GV5EAM/p00039729

[Pattaya57]

In case people don't know, you only inform the ATO you're a non-resident during your tax return. So as I'm planning to elect non-resident from 14-Oct-24, I just fill out non-resident for 259 days when I file my 2025 tax return, so pretty easy.

 

What I'm finding not easy is how to inform the banks that I'm a non-resident so that they can apply the 10% withholding tax. Note that you also have to verify an overseas address or they will withhold the top tax rate of 45% instead of 10%. Of my 3 banks: 

 

Westpac - can add overseas address online and change tax residency, but only if you say yes to being a tax resident of another country (I'm not yet a tax resident of Thailand)

 

Macquarie - says call a 1800 number to add overseas adress which I don't think you can call from overseas? No option to elect non-resident

 

NAB - Residence can change online but if you dont have another country's tax id number you have to call Australia, while to add an international address you have to call a different Australian number

 

I find it ridiculous that you have to call Australian banks from Thailand, with all the expected long hold times, just to inform your change to non-resident tax status and add an international address.

 

Has anyone had emails accepted to change your bank tax status? Or any other way not requiring long phone calls?

 

[KhunHeineken]

3 hours ago, Pattaya57 said:

In case people don't know, you only inform the ATO you're a non-resident during your tax return. So as I'm planning to elect non-resident from 14-Oct-24, I just fill out non-resident for 259 days when I file my 2025 tax return, so pretty easy.

 

What I'm finding not easy is how to inform the banks that I'm a non-resident so that they can apply the 10% withholding tax. Note that you also have to verify an overseas address or they will withhold the top tax rate of 45% instead of 10%. Of my 3 banks: 

 

Westpac - can add overseas address online and change tax residency, but only if you say yes to being a tax resident of another country (I'm not yet a tax resident of Thailand)

 

Macquarie - says call a 1800 number to add overseas adress which I don't think you can call from overseas? No option to elect non-resident

 

NAB - Residence can change online but if you dont have another country's tax id number you have to call Australia, while to add an international address you have to call a different Australian number

 

I find it ridiculous that you have to call Australian banks from Thailand, with all the expected long hold times, just to inform your change to non-resident tax status and add an international address.

 

Has anyone had emails accepted to change your bank tax status? Or any other way not requiring long phone calls?

 

I've never volunteered this information.  My bank/s have always had to ask me for it.  Maintaining a "domicile" in Australia, my reply to them is I am still a resident for tax purposes. 

 

How each member answers the question is up to them, however, making a false declaration is an offense.

 

I suspect after the proposed changes are passed, it will not matter in the future anyway. 

[Pattaya57]

43 minutes ago, KhunHeineken said:

I've never volunteered this information.  My bank/s have always had to ask me for it.  Maintaining a "domicile" in Australia, my reply to them is I am still a resident for tax purposes. 

 

How each member answers the question is up to them, however, making a false declaration is an offense.

If you want to stay a resident that's fine, I was asking how to inform banks I'm now non-resident. 

 

I don't know what false declaration you're referring to but I'm choosing to become a non-resident as I'm far better off tax wise by doing so.

 

[KhunHeineken]

14 minutes ago, Pattaya57 said:

Up to you as is it's up to me.

No, up to you as in, up to everyone how they choose to answer.

 

15 minutes ago, Pattaya57 said:

I'm choosing to become a non-resident as I'm far better off tax wise by doing so. I don't know what false declaration you're referring to.

Many continue to their bank/s they are a resident for tax purposes, when they clearly are not.  

[Pattaya57]

So I guess no members here have declared themselves to their bank as non-resident from Thailand?

 

I'm surprised when people can actually be better off by doing so.

[Will27]

9 hours ago, Pattaya57 said:

So I guess no members here have declared themselves to their bank as non-resident from Thailand?

 

I'm surprised when people can actually be better off by doing so.

I'm guessing the vast majority don't receive 40 to 50 thousand dollars in bank interest.

 

Most would be better of tax wise declaring themselves as residents IMO.

[Fat is a type of crazy]

I too am not sure how you'd be better off unless you have huge amounts available to earn interest. Many would say those huge amounts would do better in other investments but that's beside the point. 

I note that as a resident you could put funds in super e.g. a separate fund from your government one - get a tax deduction for part of it - and then later in an annuity and pay no tax. I am still working out how that works. 

Then of course as a non-resident you may have to pay tax in Thailand though it seems Defined tax super pensions are not taxable under the Double tax Agreement. 

On the interest though lets say you have  $500,000 to earn bank interest. At 5 per cent interest that's $25,000 interest or $2500 in withholding tax for non residents. The tax for a resident would be less than that say $1200 based on marginal rates. So you would need a lot of savings to gain a benefit or am I missing something. That is assuming you pay the same tax on other income such as your PSS payment as a resident or non-resident once the beneficial lower marginal tax rates are used up. 

 

[Pattaya57]

1 hour ago, Fat is a type of crazy said:

I note that as a resident you could put funds in super e.g. a separate fund from your government one - get a tax deduction for part of it - and then later in an annuity and pay no tax. I am still working out how that works. 

Last two years I paid a lot of concessional contributions to Australian Super to bring my marginal tax rate down (and build up fund for the future tax free pension). My Super fund has confirmed that I can still do that as a non-resident.

 

So basically any concessional contribution to Super is taxed at 15% instead of the 30% non-resident tax

 

My current approach as a resident is to top up super to pay 15% instead of the marginal tax rate, while my non-resident approach will be to put all non-bank income towards my Super until I take the tax free pension

 

[Fat is a type of crazy]

7 minutes ago, Pattaya57 said:

Last two years I paid a lot of concessional contributions to Australian Super to bring my marginal tax rate down (and build up fund for the future tax free pension). My Super fund has confirmed that I can still do that as a non-resident.

 

As an example, if I earn $18,200 income from non-bank interest, I can contribute $18,200 to my Super and the non-resident tax is then $0. Meanwhile all of my bank interest is at 10%. If $15k interest, total tax is $1,500

 

A resident earning the same $18,200 is also $0 tax due to the tax free threshold, however their bank interest is then 16% (+ 2% medicare). So if $15k interest, tax is $2400 + $664 medicare = $3064 total tax (double that of non-resident)

I am doing the same as paragraph 2 and get that deduction. So I can have say $18,200 interest as per your example and if I contribute a similar amount to my super fund I get the same deduction. So I still haven't used up my tax free threshold based on that income alone. So that $15,000 interest has nil tax because that first $18200 income is still available. This is setting aside other income which lets assume is taxed at the same rate for residents and non residents though residents have a benefit all the way up to $45000 income based on 2024 marginal rates given the 19 per cent rate between that and $18200. 

[Pattaya57]

3 hours ago, Will27 said:

I'm guessing the vast majority don't receive 40 to 50 thousand dollars in bank interest.

 

Most would be better of tax wise declaring themselves as residents IMO.

I take your point. In my case, I have a taxable Super pension which uses up my tax free threshold so all of my interest is taxed at either 21% or 34.5% instead of the non-resident 10%

 

There are other reasons to change to non-resident though. My Mate is married to a Thai with a child in school for last 2 years and living in his Condo. He has now bought a house and is stressing that if ATO audit him he'll never pass the resident test. So he's decided to elect non-resident on next tax return.

 

One added bonus, he has $20k capital gain on shares and gold. He found that if he declares non-resident as of 1 Jan 24 he won't have to pay the capital gains tax as prices tanked up until January (ATO treats gold and shares as sold on day starting non-resident so they use the price on that day to calculate CGT)

 

[Fat is a type of crazy]

1 hour ago, Pattaya57 said:

I take your point. In my case, I have a taxable Super pension which uses up my tax free threshold so all of my interest is taxed at either 21% or 34.5% instead of the non-resident 10%

 

There are other reasons to change to non-resident though. My Mate is married to a Thai with a child in school for last 2 years and living in his Condo. He has now bought a house and is stressing that if ATO audit him he'll never pass the resident test. So he's decided to elect non-resident on next tax return.

 

One added bonus, he has $20k capital gain on shares and gold. He found that if he declares non-resident as of 1 Jan 24 he won't have to pay the capital gains tax as prices tanked up until January (ATO treats gold and shares as sold on day starting non-resident so they use the price on that day to calculate CGT)

 

Can't see a benefit except maybe the first year. Interest alone you could have a small benefit - but won't that be offset and more by higher tax on the  PSS pension and possible other income that you note uses up the tax free threshold.   But if other reasons make it work for you then no worries. 

[Pattaya57]

Yeah I know it depends on individual. I wasnt making a thread to convince people to go non-resident, it was more to show it may not be as bad as some people think.

 

I have a detailed spreadsheet that calculates my expected tax depending on residency. I was surprised to find that I would pay a lot more tax as a resident than as a non-resident this year.

 

(It calculated I had to put $17k into tax deductable Super contributions to reduce tax to same as that of non-resident)

 

[Pattaya57]

New tax year, new lower tax rates from tomorrow.

Resident
$0 - $18,200 - tax free
$18,201 - $45,000 - 16%
$45,001 - $135,000 - 30%
(+ up to 2% medicare)

Non-Resident
Bank Interest - 10%
Other income - $0-$135,000 - 30%

The good news is I applied the new rates to this year and I'd pay 9.8% less tax as a resident and 3.7% less tax as a non-resident, so good for everyone.

[KhunHeineken]

On 6/30/2024 at 8:34 AM, Pattaya57 said:

New tax year, new lower tax rates from tomorrow.

Resident
$0 - $18,200 - tax free
$18,201 - $45,000 - 16%
$45,001 - $135,000 - 30%
(+ up to 2% medicare)

Non-Resident
Bank Interest - 10%
Other income - $0-$135,000 - 30%

The good news is I applied the new rates to this year and I'd pay 9.8% less tax as a resident and 3.7% less tax as a non-resident, so good for everyone.

Everyone's financial circumstances are different.  It comes down to tax residency, type of income earned, the amount earned, DTA etc etc.  

 

For some, it may be beneficial to liquidate all assets in Australia and place the money in an Australian bank account paying around 5%, informing the bank of your non resident status, and living off the interest, minus the 10% tax. 

 

Others may need to set up a more complex financial structure.

 

There may also be some people who simply will not be able to afford to live overseas as a non resident of Australia for tax purposes without taking a major hit to their lifestyle. 

 

These tax/s will effect different people differently.