For Australian expats moving abroad, taxation can be a complex and a confusing process. The rules are different depending on where in the world you live and what type of income you earn. For example, if you remain an Australian tax resident while living overseas then you may be taxed by both the country of residence and Australia. Regardless of your circumstances, it’s important to know the basics of tax law so that you don’t get caught out.
To help you out, here are some tax tips for Australian expatriates:
Taxation for Australians living overseas
When you move to another country, you will be a “non-resident” if you can demonstrate you fail all of Australia’s residency tests. Regardless of Australia’s rules, if you are considered a resident of the country you are in, then you will be taxed according to their laws.
When moving overseas, it’s important to find out if you need to register for tax in the other country and report your income to them. If the other country levies income tax on your worldwide income, then you may have to include Australian income in your overseas return. For example your Australian rental income.
Income, tax rates and tax credits
If you do become a non-resident for the purposes of Australian taxation, the first thing to know about taxation is that it’s based on the type of income you earn. If it is considered Australian sourced income, like income from an Australian rental property, the income will be taxed in Australia regardless of your tax residency status.
The tax Australian tax system has tiered rates ranging from 32.5% – 45%. Another important thing to be aware of is that non-residents do not get a tax free threshold, so you will be taxed at 32.5% from the first dollar of income.
Deductions and expenses
One important thing to keep in mind is that if you are a non-resident and you are not required to include certain types of income in your return then you will no longer be able to claim deductions for those expenses that were incurred in earning that income.
Know your tax implications! If you’re an Australian expatriate, then you might be wondering how your foreign income is taxed. If you become a non-resident then your foreign income will not be taxable in Australia. However, if you remain a resident then you will continue to be taxed on your worldwide income. There are other complications, like tax treaties which can alter the ordinary taxing rules for certain types of income.
Contact us to find out more in relation to your move overseas.