do I need to lodge a tax return

Do I need to lodge a tax return while living overseas?

One of the most common questions that we receive is ” Do I need to lodge a tax return while living overseas?”.

This seems like an easy question that should come with a yes/no answer, but of course, it’s Australian tax, so that it means that there’s no simple answer!

Am I an Australian tax resident?

Do I need to lodge a tax return while living overseas? The first step is to determine whether or not the Australian Taxation Office considers you an Australian resident when figuring out who owes them money. You will be considered a resident if one or more of the following is true:

  • You reside in Australia
  • Your permanent home is in Australia
  • You have been in Australia for more than half of the financial year
  • You or your spouse are a government employee working at an Australian post overseas.

If you meet ANY of the above criteria, you will be required to complete a tax return.

What if I am a non-resident for Australian tax purposes?

If you’re a non-resident, you’ll typically have one of two obligations to fulfil. Since you have an Australian tax file number, the ATO will be expecting a return of one sort or another from you. You’ll need to either lodge an tax return, or a ‘Return Not Necessary’ form for the year in question.

It’s easy to assume that you don’t need to do anything whilst you’re living and working overseas as an expat however nothing could be further from the truth!

Since you have a tax file number, if you do nothing, the ATO will by default, expect you to lodge a tax return, and a failure to do so can result in late lodgement penalties of up to $900 per return, so it’s a good idea to keep up to date!

So as a non-resident, do I need to lodge a tax return or a ‘return not necessary’ form?

Whether you need to complete an Australian tax return or lodge a ‘return not necessary’ form will depend on the type of income (if any) that you earn from Australian sources. Generally speaking, you will only be taxed on your Australian-sourced income and will only need to complete a tax return if you earn the following types of income:

  • Income from Australian employment (where those activities are carried out in Australia)
  • Income from rent on an Australian property
  • Interest income (that has not had a 10% non-resident withholding tax deducted by your bank)
  • Unfranked dividends (removing the accounting jargon, this basically means a dividend received from an Australian company that does not come with a tax credit attached)
  • Capital gains on Australian assets
  • Pensions or annuities from Australia, unless you are eligible for an exemption under a tax treaty

Just to be clear, Australian-sourced income streams on which tax has already been withheld – such as interest, dividends or royalties – will not require the completion of a tax return.

If you don’t generate any income sourced from Australia, then as a non-resident, your tax agent can lodge a ‘Return Not Necessary’ on your behalf. This will notify the ATO that you have not generated any income upon which Australian income tax is payable and by doing so, you will satisfy your lodgement obligations for that financial year.

What if I am a non-resident for Australian tax purposes but remain an Australian citizen?

Most Australian expats do not need to complete a tax return, particularly if their only Australian income is from interest and dividends.

If this describes you then you simply need to inform your financial institution and fund managers that you are no longer an Australian resident for tax purposes. They will ensure the correct tax is withheld.

You should also engage your tax agent to lodge a ‘Return Not Necessary’ form on your behalf so that the ATO marks your obligations as being complete for that financial year.

Will I be taxed twice?

Not typically, although it is possible. If you’re an Australian resident that generates foreign income, there’s a possibility that you’ll be double-taxed. However if your foreign income was earned in a country that has a Double Taxation Agreement with Australia, then usually, you’ll be able offset a portion of the tax paid in the foreign country against your Australian tax payable.

This can be a complex area of tax and it’s easy to make mistakes and end up paying more than you should! However, if you engage our team at Expat Tax Services to assist, there are ways we can help you to reduce this. To find out more please contact us for an appointment – we’ll be happy to help you answer the question ” Do I need to lodge a tax return while living overseas?” along with many more.

Shane Macfarlane
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Comments 29

  1. I am an Australian living in Canada, 12 years now and possibly moving back to Australia with my Canadian son.
    How can I come back to Australia and will the ato charge me for all of that time I worked in Canada?

    1. Post
      Author

      Hi Elaine,

      Thanks for your visiting our site and thanks also for your comment.

      Ultimately the answer to your question comes down to whether you were a resident for Australian taxation purposes or a non-resident.

      If you were an Australian resident, then you would be subject to tax on your worldwide income (including your Canadian income, When you earned it).

      If however, you were a non-resident for Australian taxation purposes, then you would only be subject to tax on your Australian sourcing come (your Canadian income would not be taxable by Australia).

      Unfortunately, residency is extremely complex as it hinges around your background and circumstances. As we don’t know your background and circumstances, I cannot categorically state that you would definitively be a non-resident and that your Canadian income would not be assessable in Australia.

      However, I can let you know that generally, where a person has been living and working overseas for an extended period of time such as yourself they would usually be non-resident for Australian taxation purposes. In those circumstances, your Canadian income and your savings would not generally be assessable when you returned to Australia.

      Elaine, thanks again for your question – hopefully my answer helps.

      Thanks

      Shane

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  5. I have been living in the UAE for nearly 5 years, I have no investments back in Australia and have declared a non residency status during my time abroad. If I return to Australia mid way through the tax year (I.e December) and become a resident again, would I be liable to pay tax on my UAE income for the pro-rata period of that same tax year prior to my return date (I.e July-December)?

    1. Post
      Author

      Hi Fiona,

      Thanks for your message and for your question. The good news is that if you are a non-resident who returns to Australia and regains tax residency in December, then you won’t be liable to pay Australian tax on your UAE income received before the date that you regained your residency. So, no, you won’t need to pay tax on your income from July to December (prior to the date that you landed in Australia).

      The reason for this is because in the year that you return, you would be a part-year resident. This means that you will have remained a non-resident for the July – December period, and you would be a resident of Australia for the rest of the year, from January – June.

      As non-residents are only liable to pay Australian tax on Australian source income (Australian interest/dividends/rent/other Australian payments etc), this means that your UAE sourced income will not be taxable in Australia during the period in which you are a non-resident (i.e. from July to December).

      Once you regain your Australian tax residency during that year though, from that date, you’ll be liable for tax on your worldwide income and gains.

      Accordingly, any payments that you receive after you regain your Australian tax residency may in fact be taxable, thus take care to receive any final payouts from the UAE to occur before regaining your Australian tax residency status.

      Thanks again for your question Fiona – if you need any assistance with your taxes, or if you need a “Returning Home” tax consultation before you make the move from the UAE, please feel free to book an appointment with us here at Expat Tax Services, via our “Book An Appointment” page or contact us.

      Cheers

      Shane

  6. I have been living in the US for 16 years and haven’t had a home in or any income from Australia since I moved. I didn’t know I was required to lodge a Return Not Necessary form. I am considering moving back to Australia next year. Does this mean that I will be fined upon return, and if so, is there a way to remedy the situation without being fined?

    Thanks

    1. Post
      Author

      Hi Rob,

      Thanks for your message and your question. Here at Expat Tax Services, this issue is the most common misconception that we come across from Australian expats located all over the globe. So rest assured that you’re not alone here – in fact, so much so that I have to explain the requirement to either lodge a return or lodge a return not necessary form (also known as a non-lodgement advice) to 8-10 new clients to our firm, every single week without fail.

      Now, in most cases, we don’t generally witness people being fined however with the introduction of the Common Reporting Standard (CRS) – another issue entirely, we expect fines and penalties to increase dramatically within the next 18 months to two years as the ATO now has access to a huge amount of data on Australian expats that, quite frankly they never had before. Take a look at my article on the Common Reporting Standard – it’s something that I wish all Australian expats were made aware of by their advisors as this is a game-changer for the ATO!

      The upshot though is that I think it would be unlikely for you to have been fined at present, although I can’t totally rule it out either. If you are interested, we can check this out for you and let you know – if you want us to do so, just send our team an email and we’ll organise that for you free of charge.

      Regardless, our advice to all clients and potential clients, including you would be to clear this up asap so that you avoid being fined (the fines are very costly) and so that you can rest easy while you have the chance.

      Now regarding remedying the situation, essentially you will either be eligible to lodge a return not necessary form (if you have no income from sources in Australia that needs to be declared in a return) in which case the solution is simple . . . we can lodge a return not necessary form on your behalf, or the alternative is that we will need to lodge returns for you each year (if you did generate any Australian sourced income). Hopefully we don’t have to do the latter for you, as that’s quite a bit more costly than the first option, so let’s hope that we can lodge return not necessary forms for you instead.

      Rob – I hope that helps. Just reach out to our team if you would like some assistance on this.

      Thanks

      Shane

  7. I’m in a similar situation to Rob – have been living and working in the UK for the past 5/6 years. I have only just become aware that I need to take action as I’ve just started to see Non-Resident withholding tax coming out of my bank account over the last couple of months – not the whole time I’ve been here. I haven’t file any tax returns since I left and my only Australian income has been bank interest and dividends. Does this mean I owe 6 years worth of tax returns or can I lodge Return not Necessary backdated?

    1. Post
      Author

      Hi Rin,

      Thanks for your message. By the sound of it, you may need to file a mix of tax returns and ‘Return Not Necessary’ forms (also known as non-lodgement advices). If the dividends that you receive are franked dividends ONLY (i.e. no unfranked dividends), then for the years where non-resident withholding tax was taken out from each your interest receipts, you’ll should be eligible to lodge a non-lodgement advice.

      For any years where you have received unfranked dividends and/or interest payments where no non-resident withholding tax was deducted, you’ll need to file a return sadly.

      If you want some help with the above, we’d be happy to assist – just reach out to us via our contact us page (above).

      Thanks

      Shane

      1. Hi Shane,

        Reading above I’m wondering if i should lodge “no lodgement advice”or tax return- if I haven’t informed my bank about me being overseas for last last year.-I’m thinking here about interests-my only australian source of income.
        Thanks in adance

        1. Post
          Author

          Hi Agnes,

          As non-residents do not have a tax-free threshold, if you have earned any interest in Australia at all (that did not have noon-resident withholding tax deducted by the bank when they paid you each amount of interest), then technically you are not eligible to lodge a ‘non-lodgement advice’. This means that you MUST lodge an Australian taxation return unfortunately, even where the interest earned was only minimal.

          To avoid this for future years, we highly recommend that you simply notify the bank that you are a non resident. The bank will then deduct withholding tax (at the rate of 10%) and you will therefore be able to lodge ‘non-lodgement advices’ for future years.

          Thanks for your question.

          Regards

          Shane

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  9. Hi Shane,
    My wife and I retired to the UK in 2017. We are dual UK/Australian citizens. We are both in our 60’s. We filed 2016/2017 tax returns before leaving Australia in March 2017. We reside in the UK, our home is in the UK, and have not returned to Australia since leaving. We are not government employees. We are registered for UK tax and file UK tax returns, which include Australian sourced income. We do no paid work in the UK.

    Our Australian sourced income comprises:
    – Savings accounts, on which non resident witholding tax is charged.
    – Dividends from IAG shares, which are normally fully franked, but I noticed they rather unhelpfully slipped in some unfranked amounts last year.
    – Payment from our allocated pensions (not self-managed). We take 4% per year.

    We were unaware of the need to do ATO reporting until a few weeks ago when my wife received an “overdue” notice from the ATO. Given the circumstances described, could you advise what sort of return or reporting we need to do to the ATO.

    Many thanks, Jim

    1. Post
      Author

      Hi Jim,

      Thanks for your question and for the background information that you’ve provided.

      Without seeing your tax information or source documents firsthand, I can’t confirm with the full degree of certainty that I’d ordinarily like to provide as I’d really need to see that information first to advise accordingly.

      However, just on the face of what you’ve outlined, rather than lodging a full tax return, you may be entitled to lodge a ‘Return Not Necessary’ form for each you instead but to do so you must meet the eligibility requirements, then principal requirement of which, is that you MUST NOT generate ANY Australian income that is required to be declared in an Australian taxation return. As non-resident’s do not have any tax-free threshold this means that there must not be even as little as one dollar of untaxed Australian income generated by that non-resident.

      Now, the reason why I believe that you both may be eligible to lodge RNN forms rather than full returns, is that despite generating income in Australia, interest from which non-resident withholding tax has been withheld is not required to be disclosed in your tax return. Similarly, franked dividends are not required to be disclosed in your tax return, and depending upon the allocated pension that you receive, often these are tax-free pensions that are similarly not generally required to be declared in your returns.

      Thus it would appear that you may be entitled to lodge RNN forms instead. Lodging a RNN form for each year that is outstanding and for each year that you continue to be eligible to lodge a RNN will satisfy your lodgement obligations in Australia.

      If you would like some assistance with the above, please reach out to our team and drop us a note via our contact us page.

      Regards

      Shane

  10. Hi Shane, I am looking to move overseas permanently but will retain investment properties, from which I will earn an income paid into an Australian bank account. I am also entitled to a Federal Government pension, PSS, that will also be paid into an Australian Bank. My question is in regard to a transfer of shares at the time of my mothers death. Am I an Australian for taxation purposes in which case there is no tax impact, on the transfer of the shares into my name, or am I considered a non-resident Australian in which case there is a very heavy tax hit once the shares are transferred.

    1. Hi Brett,

      Unfortunately it’s just too difficult to say what your residency status will be because we don’t know enough about your circumstances. As such, I’d highly recommending getting in touch or booking an appointment so that we can run through your situation in detail. Having said that however, if you have a federal government pension you may pass the third statutory test for residency which is the superannuation test.

      To be sure though, and to understand how taxes will apply to your circumstances, we’d highly recommend booking in for a residency consultation with our team or with another specialist expatriate tax firm so that we (or they) can assist you with determining your residency status if you do move overseas.

      Regards,

      Terryn

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  12. Hi Shane,

    I am an Australia citizen but have been living in the UK for the last 6 years where I have married, started a family and a home. I also have Definite Leave to Remain and, hopefully, will receive my Indefinite Leave to Remain (permanent residency) in the next 2 years. I presume that would make me a non-Resident for tax purposes?

    I have two questions.

    1. I came to the UK in February 2014. I did not file a tax return that June (2014) as, at the time, I was unaware of the need to do so. What kind of penalty can I expect for not doing so, does that penalty incur interest and how can I find out online what penalties I may owe the ATO?

    2. When I came to the UK I had a HECS debt for my tertiary studies. While I’ve been living here in the UK has that HECS debt been incurring interest and how can I find out online what my current HECS debt amount is?

    Kind regards

    1. Hi Howell,

      Residency is a complicated area so we’d need to know more about your circumstances before confirming your Australian tax residency status. Shane would be happy to discuss further with you. You can book a free ‘general enquiry’ on the appointments page on our website.

      The maximum failure to lodge penalty the ATO can impose is $1,050 per return, as you haven’t lodged a return for 6 years they could charge that penalty for each year, a total of $6,300. The ATO would only charge interest if you have tax liabilities or HECS repayments that are overdue. As part of our fee to prepare your returns we will negotiate with the ATO and try to minimise the penalty that you receive, we have a good success rate with getting the penalties reduced or eliminated.

      If you haven’t already been charged the penalties it’s always better to get them lodged before the ATO issue a penalty, so you should try get them lodged as soon as you can.

      There are a few ways you can find the balance, they are:

      • If you have access to the ATO via your myGov account you can check the balance online
      • A registered tax agent, like us, can access this information for you
      • Call the ATO

      If you would like any further assistance please book an appointment with us, or send us a message.

      Regards,

      Terryn

  13. I am Australia citizen. I live at Oversea at past 10 year. I still have some shares at Australia sharemarket. I sometimes trade shares at online. Do I need pay my share trade profits tax ? /tax return ?
    many thanks from Lan

    1. Hi Lan,

      It is difficult to give a definitive answer to your question. If the shares meet the following criteria then they will be subject to Australian Capital Gains Tax:

      • If you acquired the shares while you were an Australian tax resident and elected to defer the gain (by not including a deemed gain in your return in the year you ceased being an Australian tax resident) then the gain will be required to be included when you sell the share; or
      • The company that you’ve invested in principally invests in property, or if you own more than 10% of the company, then your investment will be subject to capital gains tax.

      If you acquired the shares while you were a non resident then they will only be subject to Australian Capital Gains tax if the company that you’ve invested in principally invests in property, or if you own more than 10% of the company, then your investment will be subject to capital gains tax.

      This article, Make tax-free capital gains on Australian shares whilst a non-resident expat, may be of assistance to you.

      If you want to discuss further, please Contact Us and one of our team will get back to you.

      Regards

      Terryn

  14. Hi, I’m an Australian citizen who moved to the U.S in 2015. I make occasional income in Australia from sporadic artwork sales, however the bulk of my income is derived from working here. I return to Australia generally once a year, for about three weeks each time. I am married to a U.S citizen, however I am still waiting for my green card/permanent residence status to be processed. Have been putting off asking this question for a while, but do I need to file tax returns for the previous 5 years because of that sporadic Australian-generated income?

    Thank you

    1. Hi Ryan,

      We would need to discuss your art sales in Australia to understand the nature of that income a bit better to answer your question.

      Regardless of the income from art sales you would still have an obligation to either lodge a tax return or a ‘return not necessary’ form for each year.

      We’d be happy to discuss this with you and explain the best course of action for you. Please book a ‘general enquiry’ appointment if you would like to discuss further.

      Thanks for question.

      Terryn

  15. Hi Shane, Terryn and team
    I am a non-resident of Australia, having been on assignment in Asia for 3+ years and now married to a Filipina and living in Manila.
    At the end of my assignment, the Australian company I was working for repatriated me back to Australia. My intention was to resign from the job in order to continue living with my wife in the Philippines. However, my Australian employer has allowed me to continue performing my job from the Philippines, so I am still employed with that company.
    My employer is paying me through their Australian payroll, and Australian tax is being deducted. I had previously assumed that this employment income would be deemed “Australian sourced” and was therefore taxable in Australia. However, your article (and others that i have read) state/suggest that typically only work performed while physically present in Australia is deemed to be Australian sourced employment income.
    Could you please advise if my interpretation sounds correct and therefore, subject to any other tax considerations with my situation, my salary paid in Australia should not be taxable in Australia (because I am not present in Australia) and therefore the tax that has been deducted from my salary should be recoverable in my tax return?
    Many thanks for your time in considering my query.

    1. Hi Chris,

      From what you have said in your post it looks like you are on the right track with your understanding.

      For a non-resident for Australian tax purposes employment income that is performed overseas will generally not be considered to be Australian source income.

      You should also consider article 14 ‘Independent personal services’ of the tax treaty between Australia and the Philippines which sets out which country has taxing for independent personal services.

      Where this will get trickier is how you deal with it as it is an uncommon employment arrangement for most employers and the ATO.

      If the tax has already been withheld then you will need to recover the tax withheld in your tax return. Your employer would have reported this as wages to the ATO. This is not ideal because you will have to demonstrate to the ATO that your income is exempt and shouldn’t have been reported by your employer as wages and shouldn’t have had PAYG withholding deducted, so the ATO will refund it to you.

      If you would like to find out more about how this should be structured or assistance with preparing your return so that you can request to be refunded the PAYG withholding please Get in touch with our Expat Tax Services team today and we will be able to assist you!

      Regards
      Terryn

  16. Hi there,
    I am an Australian PR, with Malaysian passport holder. I’ve took up a job in the Middle East as FIFO, 5 weeks on, 4 weeks off in a permanent office. During the 4 weeks off, i would generally be on 2 or 3 weeks vacation before either going back to Malaysia or Australia. My wife still lives here, and she would meet me somewhere in the world during my time-off. We do have a house here, as my sister live with us. This FY, I’ve spent more than 183 days in Australia due to the COVID-19 as I’ve been in Australia WFH since March and unable to return to my workplace due to the lock-down.
    Am I considered a resident or non-resident for tax purposes?

    1. Hi Kelvin,

      This recent time during COVID-19 has created a lot of uncertainty and unfortunately has the potential to complicate Australian tax residency.

      To address the situation, the ATO has recently released a set of amended guidelines targeted to clarify the residency positions for employees who were in Australia temporarily and are now unable to leave due to the border closure restrictions introduced by the Australian Government.

      The advice is that if you were not an Australian resident for tax purposes when you arrived in Australia, there is some leniency and flexibility in the residency rules for the moment. If this is your situation, you will not be recognised as a resident simply by being forced to stay in Australia due to COVID-19.

      The conditions for this to apply to you are that you must be in Australia temporarily, even if this is extended for weeks or months due to the current situation. You must usually live permanently overseas, and intend to return to your other country as soon as the borders open and you are able to leave.

      Your tax obligations will continue in the same way as they have previously; you will not be assessed or taxed in Australia on any income that has been earned while in the country.

      However, as a FIFO worker, ordinarily it can be difficult to establish that you are a non-resident for Australian tax purposes as there are in fact 4 residency tests which you have to fail to be considered a non-resident. The tests are:

      • ‘Resides Test’
      • ‘Domicile Test’,
      • ‘183 Day Test’, and
      • ‘Commonwealth Superannuation Test’

      This article provides more information about the residency tests.

      If you would like to find out more Get in touch with our Expat Tax Services team today!

      Thanks

      Terryn

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