Australian Aged Pension

[halloween]

Just now, moojar said:

I happen to be waiting on a call-back from the ATO to ask about this 'exemption' thing.  In my case I want to sell an investment property in the spring a year or two from now, then quit work and "go travelling" for more than half of that financial year. 

 

The non-resident tax rates are worse than 32.5% btw - it's 32.5% of every dollar up to $80k or $90k, and more beyond that - 45% for anything over $180k if you are lucky enough to make that much. 

 

But back on topic, I would honestly be surprised if they give you dispensation to come to Oz once per year for as long as it takes you to earn the $6500, and be treated as 'resident' for tax purposes.  But I am no expert - I really hope you can do that!  Will be interested to hear what they say when you enquire. 

 

This page covers the residency tests - it's not just the '183 day test', as you know.   

https://www.ato.gov.au/individuals/international-tax-for-individuals/in-detail/residency/residency---the-resides-test/

 - the page covers both 'incoming' and 'outgoing' residents.  

 

 

The suggestion came from my accountant. In his opinion, ATO are keen to have Oz citizens remain tax residents, and that if I maintain my official residence in Oz with all the usual (bank, phone, vehicle), status likely to be granted even though I plan to travel extensively in the next few years. As it only involves a letter, why not give it a spin.

[Will27]

14 minutes ago, halloween said:

The suggestion came from my accountant. In his opinion, ATO are keen to have Oz citizens remain tax residents, and that if I maintain my official residence in Oz with all the usual (bank, phone, vehicle), status likely to be granted even though I plan to travel extensively in the next few years. As it only involves a letter, why not give it a spin.

I would've thought, if the ATO then deem you to be a non-resident, you're pretty well locked in when you lodge your tax return.

 

Personally, I wouldn't be poking the bear.

[halloween]

2 minutes ago, Will27 said:

I would've thought, if the ATO then deem you to be a non-resident, you're pretty well locked in when you lodge your tax return.

 

Personally, I wouldn't be poking the bear.

If the request is denied I will be in the same position as I was without it. There is the possibility of a benefit, if you don't ask you don't get it.

[Will27]

1 minute ago, halloween said:

If the request is denied I will be in the same position as I was without it. There is the possibility of a benefit, if you don't ask you don't get it.

Are you claiming to be a resident or non-resident now?

[halloween]

Just now, Will27 said:

Are you claiming to be a resident or non-resident now?

I am a tax resident now, have been so for the last 4 years, but I spend 5+ months here in Thailand  after living here for 13+ years.

[Will27]

4 minutes ago, halloween said:

I am a tax resident now, have been so for the last 4 years, but I spend 5+ months here in Thailand  after living here for 13+ years.

So the ruling would be to ask the ATO if you're a resident or not?

 

What if they decide, depending on your circumstances that you aren't?

 

Is it worth the risk?

[halloween]

2 minutes ago, Will27 said:

So the ruling would be to ask the ATO if you're a resident or not?

 

What if they decide, depending on your circumstances that you aren't?

 

Is it worth the risk?

The ruling will be AFTER I am an OAP and when I will be out of the country for extended periods - more than 183 days/year. If they refuse to accept me as a tax resident, I will reconsider whether I return to work or not.

There is NO risk. This is an accepted procedure asking for a favourable ruling before I decide future actions.

[Will27]

2 minutes ago, halloween said:

The ruling will be AFTER I am an OAP and when I will be out of the country for extended periods - more than 183 days/year. If they refuse to accept me as a tax resident, I will reconsider whether I return to work or not.

There is NO risk. This is an accepted procedure asking for a favourable ruling before I decide future actions.

I tend to disagree.

 

Why should the ruling matter before or after you're on the OAP?

You say there's no risk, but if deemed to be a non-resident, you're stuck with non-resident rates.

 

The way I look at it, the majority of people (retirees)  living in Thailand are pretty much non-residents for tax purposes.

I reckon most, especially the ones solely on the OAP declare they're residents.

 

Each to their own, but I wouldn't be asking for a ruling.

[halloween]

6 hours ago, Will27 said:

I tend to disagree.

 

Why should the ruling matter before or after you're on the OAP?

You say there's no risk, but if deemed to be a non-resident, you're stuck with non-resident rates.

 

The way I look at it, the majority of people (retirees)  living in Thailand are pretty much non-residents for tax purposes.

I reckon most, especially the ones solely on the OAP declare they're residents.

 

Each to their own, but I wouldn't be asking for a ruling.

I don't know how to explain this more clearly for you. While I am working, I make sure I am in country for 183 days to be a tax resident. After I am on OAP I will not be in country for 183 days, I may be working about 1 month per year, so will be a tax non-resident unless the ATO is prepared to ignore the 183 day rule and grant me tax residence.

Without the ruling I will not qualify. The worst they can do is say no, at which point I will be exactly at the same point as I would have if I hadn't applied. 

If for some strange reason I decided to go back and stay 183 days I would qualify for residence again. Asking for a non-application doesn't rule me out from ever being a tax resident again, and even if granted it is "at the commissioner's pleasure" meaning they can revoke it at any time.

[Will27]

10 minutes ago, halloween said:

I don't know how to explain this more clearly for you. While I am working, I make sure I am in country for 183 days to be a tax resident. After I am on OAP I will not be in country for 183 days, I may be working about 1 month per year, so will be a tax non-resident unless the ATO is prepared to ignore the 183 day rule and grant me tax residence.

Without the ruling I will not qualify. The worst they can do is say no, at which point I will be exactly at the same point as I would have if I hadn't applied. 

If for some strange reason I decided to go back and stay 183 days I would qualify for residence again. Asking for a non-application doesn't rule me out from ever being a tax resident again, and even if granted it is "at the commissioner's pleasure" meaning they can revoke it at any time.

I didn't realise you were going to declare yourself as a non-resident once you get on the OAP.

 

If that's the case, I agree, you have nothing to lose.

[4MyEgo]

On 08/07/2017 at 11:11 PM, halloween said:

You are allowed to earn $250/fn without loss of pension, and this accumulates for up to 1 year, or $6,500. So I can return, work for as long as necessary to earn that amount.

The fly in the ointment is the tax @ 32c/$ for a tax non-resident, BUT if I apply to the tax office can get a ruling that i remain a resident reducing tax to 19c, as long as I maintain other residence requirements. Once a ATO ruling is issued, remains in force until withdrawn.

 

I like your style, good luck with it all

[4MyEgo]

12 hours ago, moojar said:

I happen to be waiting on a call-back from the ATO to ask about this 'exemption' thing.  In my case I want to sell an investment property in the spring a year or two from now, then quit work and "go travelling" for more than half of that financial year. 

 

The non-resident tax rates are worse than 32.5% btw - it's 32.5% of every dollar up to $80k or $90k, and more beyond that - 45% for anything over $180k if you are lucky enough to make that much. 

 

But back on topic, I would honestly be surprised if they give you dispensation to come to Oz once per year for as long as it takes you to earn the $6500, and be treated as 'resident' for tax purposes.  But I am no expert - I really hope you can do that!  Will be interested to hear what they say when you enquire. 

 

This page covers the residency tests - it's not just the '183 day test', as you know.   

https://www.ato.gov.au/individuals/international-tax-for-individuals/in-detail/residency/residency---the-resides-test/

 - the page covers both 'incoming' and 'outgoing' residents.  

 

 

If you haven't left Australia yet, I would suggest you flick your investment property before you leave as there are other options out there.

 

There is a saying, "I have been to where you are coming from", suffice to say, if you hold onto your investment property and go travelling overseas, unless you can prove that you are not dogged down in one place at a time, you have buckley's, in my opinion, and you want to get everything in writing from the ATO, remember nothing is binding, they have disclaimers.

 

If they tell you what I am telling you, then flick the investment before you go because any increase thereafter is all theirs, on top of the 32.5c in every $, lets not forget you will on top of that pay council, water rates, insurance, agents com, repairs, vacany factor, reletting fees, lease fees etc etc which makes it not worth while, especially if they are going to also take your capital gains from the date you depart, F that !!!

 

You may or may not be aware, but as a foreign resident you can avoid paying tax legally, not talking property, your only option is to invest in the ASX, Australian Stock Exchange, you can buy and sell shares that don't pay dividends, there is no tax payable on the gains, you can buy fully franked shares like the CBA or Telstra that pay dividends fully franked (tax already paid) and again, no tax on capital gains tax on there increase, so if you don't know about this, you might want to polish up on it before you depart.

 

I sold my place and have been making 15% on my money from here and paying zero tax, I also have some money in term deposits and pay 10% withholding tax, although that money is maturing this month and next month so the 2.5% and 2.6% that I am earning is now going to go to between 5%-6% from fully franked dividends and we all know you don't need much to survive on here, so this ups the anti.

 

Depending on where your investment property is, I can tell you now, property won't be going up in Australia for at least a decade, its had a 5 year run which is out of the normal and will have to come back, so do yourself a favour, seek professional advise or do what I did, research and do your own, but only invest as much as your prepared to lose, now with blue chip stocks, they are pretty much a safe bet, if your not looking at selling for a while, just sit back, relax, collect and play the field (day trade) with some spare cash and hopefully double or triple your annual return.

 

Good luck either way.

[ELVIS123456]

On 7/7/2017 at 8:29 PM, giddyup said:

I just can't see that happening. If payment of pensions stopped for all expats there would be a mass migration back to Australia, probably thousands of displaced people who would be forced to live in poverty. Not to mention all those who have bought houses and car here, have long term Thai partners etc. A lot of the expats would be in their 70's and 80's. The disruption would be catastrophic.

I hope you are right, but it looks like they are going to continue to take away the right to get the pension, and those blokes like us living overseas (90% males?) are an easy target. I also doubt they will think that far ahead, and consider what happens if they all come home - that would require 'vision'.

 

 

[moojar]

I've had a look around and I now believe that Sky News line about cutting off pensions is wrong / misleading  - "The government is also trying again to stop pension payments to people who've been overseas for six weeks and immediately for permanent departures after previously failing to get the measure through parliament."

 

They missed the word 'supplements', which makes all the difference.  It is just about cutting off the supplements - electricity etc - much sooner.  Sounds like some people have been getting these extra payments the whole time they are out of Oz, which is just wrong IMO.

 

This website records legislation introduced:  

https://www.openaustralia.org.au/debates/?id=2017-06-21.33.1

 - The discussion re the supplements is about 30 lines down, starting with "Changes to the payment of the Pension Supplement for permanent departures overseas and temporary absences"

 

Nothing there about the pro-rata years of residency thing being reintroduced, which surprises me.  Surprises the journalists too apparently. 

 

 

[ELVIS123456]

On 7/9/2017 at 11:10 AM, halloween said:

The suggestion came from my accountant. In his opinion, ATO are keen to have Oz citizens remain tax residents, and that if I maintain my official residence in Oz with all the usual (bank, phone, vehicle), status likely to be granted even though I plan to travel extensively in the next few years. As it only involves a letter, why not give it a spin.

If I may jump in here and pass on my advice/info to all.

 

Halloween is on the right track - but you dont need to and cannot get a 'ruling'. Using the ATO site you can yourself decide that you are a resident for tax purposes - the Aust tax system is a self-assessment based system. The 'rulings' as such (and I got a few) are just 'guides' - they cannot and will not make a definitive ruling - they will only give a guide - and refer you to a qualified financial adviser or accountant - who you can pay to give you a guide/advice.

 

Unlike the DSS/CLink system where they give 'rulings' that are based on your application for anything (eg OAP), the ATO system does not give rulings - only advice.  You decide - with or without a financial adviser or accountant - and you lodge your tax return on that basis. If the ATO decides to review/audit you, then and only then will they make a 'ruling' - and only on what you submitted in your past tax return/s.

 

Even though you do all the right things - maintain residence, car, vote, rates, rent, bank, etc etc - you can still be declared a non-resident for tax purposes if you do something 'wrong' - but only if/when you are audited in the future by ATO.  But if you based your decision on advice given by ATO, then you can have a 'discussion' about it. Some win, some lose. 

 

What I did was to complete the following websites 'tests'.  I then sent 3 of them to ATO for an 'ruling' on each one. ATO came back with very vague answers, because they were 'hypothetical scenarios' - they will not give definitive answers in advance.  So then I did the tests again and again - changing the answers each time. That gave me the information I needed on what action I needed to do, so that I could be a resident for tax purposes for 2, 5 or 10 years - the test tool gives you an answer each time for 2 and 5 and 10 years.

 

But the big issue is maintaining a residence and a presence in Aust - home, bank, vote, car, licence, etc etc.  With that you can almost certainly remain a resident for tax, even though you are overseas a lot - who says you cant have lots of holidays. BUT - you need to carefully review things every 2 to 5 years because it seems ATO has those as 'trigger' points in their assessment criteria - and the rules do change now and then.

 

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

 

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

 

 

[Flying Kiwi]

1 hour ago, ELVIS123456 said:

If I may jump in here and pass on my advice/info to all.

 

Halloween is on the right track - but you dont need to and cannot get a 'ruling'. Using the ATO site you can yourself decide that you are a resident for tax purposes - the Aust tax system is a self-assessment based system. The 'rulings' as such (and I got a few) are just 'guides' - they cannot and will not make a definitive ruling - they will only give a guide - and refer you to a qualified financial adviser or accountant - who you can pay to give you a guide/advice.

 

Unlike the DSS/CLink system where they give 'rulings' that are based on your application for anything (eg OAP), the ATO system does not give rulings - only advice.  You decide - with or without a financial adviser or accountant - and you lodge your tax return on that basis. If the ATO decides to review/audit you, then and only then will they make a 'ruling' - and only on what you submitted in your past tax return/s.

 

Even though you do all the right things - maintain residence, car, vote, rates, rent, bank, etc etc - you can still be declared a non-resident for tax purposes if you do something 'wrong' - but only if/when you are audited in the future by ATO.  But if you based your decision on advice given by ATO, then you can have a 'discussion' about it. Some win, some lose. 

 

What I did was to complete the following websites 'tests'.  I then sent 3 of them to ATO for an 'ruling' on each one. ATO came back with very vague answers, because they were 'hypothetical scenarios' - they will not give definitive answers in advance.  So then I did the tests again and again - changing the answers each time. That gave me the information I needed on what action I needed to do, so that I could be a resident for tax purposes for 2, 5 or 10 years - the test tool gives you an answer each time for 2 and 5 and 10 years.

 

But the big issue is maintaining a residence and a presence in Aust - home, bank, vote, car, licence, etc etc.  With that you can almost certainly remain a resident for tax, even though you are overseas a lot - who says you cant have lots of holidays. BUT - you need to carefully review things every 2 to 5 years because it seems ATO has those as 'trigger' points in their assessment criteria - and the rules do change now and then.

 

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

 

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

 

 

When information comes from the horses mouth that's when we listen any other sources should be classed as conjecture at the very least, with respect to accountants WHAT would they know regards government policy on Pensions I would has at a guess there is no way that government policy would outlined to accountants before and public announcement was made there are all sorts of protocols that the government has to follow it's law.

Lets think about it, as of today  Centrlink's info page it clearly states MOST people are able to take there Aged Pension overseas. we should all take a deep breath relax and enjoy our time in whatever country we are living in because at the end of the day there is nothing we can do about it and if it does happen the changes in policy do not come into play for at least 1 year.

 

I make these comments with respect  and courtesy to all the contributors on this subject of aged pensions

 

[BaanOz]

On 09/07/2017 at 11:48 PM, 4MyEgo said:

I am earning is now going to go to between 5%-6% from fully franked dividends and we all know you don't need much to survive on here, so this ups the anti.

 

Nice, I'm just trying to work out if franking amount drops and need to pay some tax. Thinking ahead.

Found this: http://www.austlii.edu.au/au/other/dfat/treaties/1989/36.html
 

Under Dividends there's an odd thing about 15% tax "if the company paying the dividends engages in an industrial undertaking" and 20% for all other cases.

Edited July 13, 2017 by BaanOz

[4MyEgo]

45 minutes ago, BaanOz said:

 

Nice, I'm just trying to work out if franking amount drops and need to pay some tax. Thinking ahead.

Found this: http://www.austlii.edu.au/au/other/dfat/treaties/1989/36.html
 

Under Dividends there's an odd thing about 15% tax "if the company paying the dividends engages in an industrial undertaking" and 20% for all other cases.

I look at it this way, as a foreign resident, I am advised that I do not need to pay tax on "fully" franked dividends because the tax is already paid. On "unfranked" or part franked dividends that's a whole new ball game, tax is payable, on the difference to 32.5c in the $ up to $80k

 

If your a resident I can't answer your question because you could off-set losses etc etc

 

Hope that answers some of your questions.

[steve burton]

U have to live in Australia for the last two years before u apply for the pension.if you have lived in Australia for 35 years you get the full pension less the concessions? About 30$a fortnight. .i go back to Australia 2time a year .i always report two Centrelink


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[Freed1948]

3 hours ago, steve burton said:

U have to live in Australia for the last two years before u apply for the pension.if you have lived in Australia for 35 years you get the full pension less the concessions? About 30$a fortnight. .i go back to Australia 2time a year .i always report two Centrelink


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You can apply for the pension at any time.

The two year thing is IF you have been absent from Australia for a period of time.

Check DHS website to clarify.

[BaanOz]

16 hours ago, 4MyEgo said:

On "unfranked" or part franked dividends that's a whole new ball game

Thanks, bit off topic (not about pension) but I've been looking further into this and Thailand has a tax treaty with Australia. If you advise the share registry/company they will withhold 15% tax from the dividend.

 

No tax return if you advise but otherwise have to lodge a tax return. Same thing if you don't advise banks to withhold 10% interest tax.

 

Here:
https://www.ato.gov.au/Forms/You-and-your-shares-2016/?page=14#Dividends_paid_or_credited_to_non_resident_shareholders

[4MyEgo]

56 minutes ago, BaanOz said:

Thanks, bit off topic (not about pension) but I've been looking further into this and Thailand has a tax treaty with Australia. If you advise the share registry/company they will withhold 15% tax from the dividend.

 

No tax return if you advise but otherwise have to lodge a tax return. Same thing if you don't advise banks to withhold 10% interest tax.

 

Here:
https://www.ato.gov.au/Forms/You-and-your-shares-2016/?page=14#Dividends_paid_or_credited_to_non_resident_shareholders

As a foreign resident who only buys fully franked shares, i.e. tax paid, or shares that don't pay dividends, i.e. capital gains, I don't pay tax and don't lodge a tax return, this is how I have understood it all the way along.

 

If you are a non-resident of Australia, the franked amount of dividends you are paid or credited are not subject to Australian income and withholding taxes. The unfranked amount will be subject to withholding tax.

 

If you are a resident its different.

[BaanOz]

1 minute ago, 4MyEgo said:

As a foreign resident who only buys fully franked shares, i.e. tax paid, or shares that don't pay dividends, i.e. capital gains, I don't pay tax and don't lodge a tax return, this is how I have understood it all the way along.

 

If you are a non-resident of Australia, the franked amount of dividends you are paid or credited are not subject to Australian income and withholding taxes. The unfranked amount will be subject to withholding tax.

 

If you are a resident its different.

Maybe wasn't clear in the first post but I'm talking about an "Australian non-resident for tax" and taxation on dividends if not 100% franked.

I know 100% that 100% franked is tax free :)

[4MyEgo]

14 hours ago, Freed1948 said:

You can apply for the pension at any time.

The two year thing is IF you have been absent from Australia for a period of time.

Check DHS website to clarify.

To go further, if you left Australia before you reached the qualifying old age pension age, and have been living outside of Australia for more than 183 days in any financial year, and do not claim your Australian residency, it is more than likely that you will have to return and stay for a period of two years, either prior to reaching or after reaching you qualifying old pension age.

 

CentreLink will determine if you are an Australian Resident, or a Foreign resident, but if you have been a non resident and do the time, i.e. 2 years, tell them the BS they want to hear, i.e. not going back to the best of my knowledge and am remain in Australia for that two years period, then you can go back overseas once you start receiving the pension, after 6 weeks the subsidies part of it, i.e. electricity payments and pension concession card get cancelled, in my understanding of it all.

[giddyup]

3 minutes ago, 4MyEgo said:

To go further, if you left Australia before you reached the qualifying old age pension age, and have been living outside of Australia for more than 183 days in any financial year, and do not claim your Australian residency, it is more than likely that you will have to return and stay for a period of two years, either prior to reaching or after reaching you qualifying old pension age.

 

CentreLink will determine if you are an Australian Resident, or a Foreign resident, but if you have been a non resident and do the time, i.e. 2 years, tell them the BS they want to hear, i.e. not going back to the best of my knowledge and am remain in Australia for that two years period, then you can go back overseas once you start receiving the pension, after 6 weeks the subsidies part of it, i.e. electricity payments and pension concession card get cancelled, in my understanding of it all.

As I understand it, you have to spend the full two years to qualify. You obviously receive the pension within Australia during this time, but if you leave the pension stops and the qualifying period is put on hold until your return. Once the two years is completed your pension becomes mobile and you can live wherever you like.

Edited July 14, 2017 by giddyup

[4MyEgo]

3 hours ago, giddyup said:

As I understand it, you have to spend the full two years to qualify. You obviously receive the pension within Australia during this time, but if you leave the pension stops and the qualifying period is put on hold until your return. Once the two years is completed your pension becomes mobile and you can live wherever you like.

Correct, e.g. if say you are 67 and born before a certain period, you can start getting it straight away after CentreLink have approved you, however if you go back and are 65, you have to wait for the 2 years to be up, and CentreLink approving you before you can get it, i.e. you reaching 67 before you can go, 6 2 1, half dozen the other, i.e. 65 two years without the pension and then your free, or 67 two years on the pension and 69 before your free, although someone said if you go back @ 65 and don't get a job, you can go on the dole for 2 years (new-start), which is not to my liking, rather be working, but each to their own.

Edited July 14, 2017 by 4MyEgo

[halloween]

2 hours ago, 4MyEgo said:

Correct, e.g. if say you are 67 and born before a certain period, you can start getting it straight away after CentreLink have approved you, however if you go back and are 65, you have to wait for the 2 years to be up, and CentreLink approving you before you can get it, i.e. you reaching 67 before you can go, 6 2 1, half dozen the other, i.e. 65 two years without the pension and then your free, or 67 two years on the pension and 69 before your free, although someone said if you go back @ 65 and don't get a job, you can go on the dole for 2 years (new-start), which is not to my liking, rather be working, but each to their own.

Because I went back before I qualified for the pension and restarted tax residence, it doesn't seem to matter that I have not spent all of that time in country.  I have been doing just over 183 days for 3 yrs, and the CL guy said shouldn't be a problem when my OAP comes due in May.

[4MyEgo]

1 hour ago, halloween said:

Because I went back before I qualified for the pension and restarted tax residence, it doesn't seem to matter that I have not spent all of that time in country.  I have been doing just over 183 days for 3 yrs, and the CL guy said shouldn't be a problem when my OAP comes due in May.

That's great information to know, thanks Halloween.

 

For me as I have kids going to school, I will have to return, unless I am prepared to not see them for 183 days a year which I doubt that I could do.

 

Who's by then I might be dead and cremated, or fail the assets test lol

[halloween]

3 hours ago, 4MyEgo said:

That's great information to know, thanks Halloween.

 

For me as I have kids going to school, I will have to return, unless I am prepared to not see them for 183 days a year which I doubt that I could do.

 

Who's by then I might be dead and cremated, or fail the assets test lol

Yeah, it's hard, but 183 days/year for a couple of years is a lot better than 2 years straight.

[4MyEgo]

12 hours ago, halloween said:

Yeah, it's hard, but 183 days/year for a couple of years is a lot better than 2 years straight.

Prison sentence

 

But I think a couple of years with the family would be better then being away from them twice for 183 days, i.e. I can still do what I do here, (live in the bush) away from the production plant life style, and kids can go to a rural school.

 

I figures it won't be that bad, can also hire one of those vans to move around the country during school holidays to make the most of it.

 

But I figure by then, I should be a multi-millionaire so won't need to go back, here's hoping......lol

 

Edited July 15, 2017 by 4MyEgo