expat tax

Planning – the key to avoiding expat tax traps

You’re heading off from Australia to work overseas. It’s a career opportunity, a cultural adventure, and a financial boost.

To ensure all three work in your favour with your Australian taxes, it’s essential to avoid unnecessary losses. You can’t achieve that by dealing with the issues as they come up. Considering all the tax issues, tax traps, tax opportunities and planning for them well in advance is the key to ensure that you are set up for success.

Here are three of the major factors you need to consider in your pre-planning:

Double Taxation

You don’t want to be doubling up, paying tax in Australia and in your new country. Australia has DTA’s (Double Tax Agreements) with over 40 countries to ensure that’s not the case. For example, the US, the UK, and Singapore are a few of those countries. Hong Kong is not one of them. Does Australia have an agreement with the country you’re heading off to work in? Do you understand how this will work? How will it apply to your specific circumstances, to your assets and your income from all sources?

Australian tax residency. It’s easy to get this wrong – don’t assume that you are a non-resident!

Whether or not you’re considered a resident or non-resident for Australian taxation purposes has massive implications for your taxes, and ultimately for your take-home income. Invariably this affects your budgeting and ultimately your standard of living.

Australia’s residency rules are the most complex residency rules on this earth, and so many, many Australian expats get this wrong, resulting in disastrous results.

Residency for Australian taxation purposes is very much dependant upon the facts and circumstances of a taxpayer’s life. But you’re an independent individual. Your life is unique. As such there is no one glove fit’s all approach when it comes to tax residency.

Combine that with the fact that the very wording of two of Australia’s main residency tests is simply NOT defined in Australia’s tax legislation, meaning that you need to have an understanding of Common Law and Legal Precedent, both of which evolve over time as more and more case come before the courts, assessing a person’s residency status is an extremely difficult and complex exercise!

But understanding your residency status, both for Australia and for the country that you are moving to is absolutely critical as it will allow you to:

  • be tax efficient, minimising taxes wherever possible across both jurisdictions,
  • minimise tax risks by ensuring that your income and assets are structured correctly,
  • maximise any tax opportunities and tax strategies that may be available to you, and
  • minimise the risk of any tax traps or dangers that you may unwittingly be exposed to in one or both jurisdictions

What’s taxed and what’s not.

Your salary package might include health and travel insurance and relocation costs. In the event one or more of these isn’t included, you could face a financial blow-out due to foreign taxes and charges in these areas. Or, if there is a financial advantage to you the other way, it might be best not to include some of these in your package.

In addition to the above, depending on your personal situation, it’s important to understand just how every asset that you own, and every element of income that you earn from all sources, will be taxed by Australia and the country that you are moving to.
You’ll need to best understand how to manage your taxes, finances, financial assets in Australia and abroad (including issues relating to renting your property out, capital gains tax etc) and you’ll need to understand all of the tax issues involved when you eventually return home.

It’s for all of these reasons and more that we highly recommend that anybody who is about to move overseas to become an Australian expat should book in an ‘Outbound Expat’ tax consultation with an expatriate tax specialist.

Whether you use our firm, here at Expat Tax Services or another is not important. Regardless of who you use, we highly recommend that you do an ‘Outbound Expat’ tax consultation with a specialist expatriate tax firm as it will set you up for success.

Working in advance with an expatriate tax specialist like our team here at Expat Tax Services will allow you to understand all of the above issue. This will allow you to minimise your taxes and maximised your opportunities to grow your wealth tax effectively – in short, working with us here at Expat Tax Services, WILL set you up for success

Pre-planning delivers peace-of-mind and allows you to concentrate on your career, your adventure, and, ultimately, your financial future.

So if you are interested in booking an ‘Outbound Expat’ tax consultation with our team, please book your appointment via our Book an Appointment page. You’ll be glad you did!

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Shane Macfarlane

CEO & Founder at Expat Tax Services
Shane's an Australian Chartered Accountant and Australian expat tax specialist who's also an expat himself (based in Asia). Shane's passionate about tax and legitimate tax minimisation, tax-planning and structuring, particularly as it relates to Australian expats who are often subject to high rates of tax back home in Australia.
Shane Macfarlane
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