Accountants, Tax Agents and Bookkeepers discussion and advisory

Tax Issues When Dealing With Australians Working Overseas

Australian Tax Office has defined all tax rules and regulations clearly enough for citizens to understand them easily. However, sometimes the situation is a bit complex where “ifs” and “buts” create confusion in the mind of tax payer. Today, we will be discussing the commonly faced tax issues by Australians who work aboard. An individual must have clear idea of how the taxation rules are going to apply when looking forward to work overseas.

Below we have mentioned some of the basic tax issues and circumstances which you need to be aware of if you work outside Australia permanently or temporarily:

• If your status has become “foreign resident” from Australian resident during financial year then you are required to:

      Answer “yes” on tax return’s question that are you an Australian resident

      Claim for number of days during a financial year when you weren’t Australian resident for tax return for purpose of Medicare levy exemption days

      Get tax offset claim reduced for any dependant spouse if the spouse and you were not Australian residents by mentioning the time period

• Lodge the early return if leaving Australia
• Be aware of CGT obligations if you are retaining assets in Australia while being a resident before leaving
• Liable to pay surcharge of Medicare levy in case the income is surplus of relevant Medicare levy surcharge threshold only if you have cancelled private health insurance while going abroad
• Take care of obligations if you have taken Student Financial Supplement Scheme or Higher Education Loan Programme or the debt will keep indexing every year until completely paid. Making voluntary repayments is an option.

Superannuation Obligations For Australians Working Overseas

In multinational companies, it usually happens that the employer sends employees abroad temporarily for work reasons. In this case, the employer is obligated to pay your super payments in Australia on your behalf. On the other hand, your employer and you don’t have to pay any super payments in the other country if these conditions are met:

1. Having bilateral social security agreement with Government of Australia
2. Being covered with super guarantee in Australia
3. Employer gaining Certificate of coverage for employee from the ATO

It is a must for you to get the copy of Certificate from employer while travelling abroad. It can be shown to other country’s authorities if any issue comes up. You can apply for the Certificate of Coverage over the internet.

International Taxation Obligations Within Australia

Tax Residency – The tax situation cannot be understood till your residency is not clear. You should be an Australian resident for the ATO’s rules to be applied in your case. Every individual is taxed on the total worldwide income generated from every source.

Overseas Living – Tax affairs can only be sorted out if you take care of certain things whether you are an Australian resident or not. For all Australians working abroad, it is a must to declare their worldwide income for the purpose of Australian tax return. It is applicable in that case even if tax has been paid in the other country where you earned the income.

Investing Abroad – Income earned from renting property abroad, selling assets overseas and interest gained from any source in another country. All these factors add up when you declare the worldwide income. In Australia the foreign income tax offset could be claimed if the tax has already been paid in other country for earnings mentioned above.

More On Tax Obligations For Australians Working Overseas

It is important to provide information on worldwide income if you are an Australian resident and working abroad. The worldwide income includes; exempt foreign employment income and assemble income. It has to be declared even if the tax has been taken by the other country for income you earned.

1. Foreign Employment Income: Irrespective of whether it is exempt or assemble, you must report it to ATO.
2. Foreign Income Tax Offset Claim: Double taxation will no more exist if you make a claim for foreign income tax offset in case you have paid tax in the other country for earning there.
3. Lump sum & Allowances Payments: There are certain allowances which are taxable such as employer paying expenses for you living away from home.
4. Coverage for Double Superannuation: If you don’t have a bilateral superannuation agreement then double superannuation coverage has to be paid by employer in Australia and the country where employee is working.
5. Abroad Police, Defence & Other Official Service: Members of certain departments or organizations which work abroad to provide aid are exempted from paying any tax on foreign income such as Australian Police.

Information For Individuals About To Leave Or Have Left Australia

There are 3 major aspects which we recommend you to look at if you have left or about to leave Australia.

1. Tax Residency: In case you are going to stay Australian resident then lodge the tax return after declaring world income as mentioned above. On the other hand, tax obligations will change completely if residency changes.
2. Advance Tax Return Lodging: In case you have to leave Australia before financial year ends then you will be allowed to lodge tax return earlier.
3. Outside Australia Tax Return Lodging: While being outside Australia, you could lodge the tax return online via e-tax during July 1 – October 31.