expat tax

Australian Expat Tax Advice

When providing financial advice to Aussie expats, Australian expat tax advice is always a key consideration of the advice process.

As the Australian tax laws change frequently this is an important consideration for expats and ensures that when we are advising expats they receive the most up to date information.

The issue of whether you are deemed to reside in Australia or not, which in turn may dictate whether you are a resident or non-resident for tax purposes, can be determined by a number of tests outlined by the ATO.

Tax Ruling 98/17 outlines the circumstances in which an individual is considered as residing in Australia. No single factor is likely to be decisive and many will be interrelated.

The ‘resides’ test

The period of physical presence or length of time in Australia is not, by itself, conclusive when determining whether an individual resides here.

The ATO has, however, indicated that six months (which does not need to be continuous) would be an appropriate time to decide whether the individual’s behaviour is consistent with living in Australia.

To reside in Australia, a person needs to display behaviour over a period of time that is consistent with residing here, such as a degree of continuity, a routine or habit.

An individual may be considered an Australian resident if their day-to-day activities in Australia are similar to their behaviour before entering Australia.

Factors the ATO take into account in determining whether a person is a resident include

Intention or purpose of presence.

Family/business ties

Maintenance and location of assets

Social and living arrangements

If the ‘resides’ test cannot be met, an individual may still be considered an Australian tax resident if one of the following statutory tests can be met.

Domicile Test

A person would be considered an Australian resident if their domicile is in Australia, unless the ATO is satisfied their permanent place of abode is outside Australia. A domicile is the place that is considered by law to be a person’s permanent home. An individual may have no fixed place of abode but the law considers that they will always have a domicile. This test of residency normally applies when an Australian resident goes to work overseas for an extended period.

When determining whether a person has a permanent place of abode outside Australia, the ATO will consider the factors outlined in Taxation Ruling IT 2650 including the:

Intended and actual length of stay overseas, and continuity of that stay.

Existence of an established home overseas.

Existence of a residence in Australia (while overseas).

Family and financial ties.

The weight of each factor will vary with the individual circumstances of each particular case and no single factor will be decisive.

183 Day Test

Under this test, if an individual is present in Australia for more than half of the income tax year (whether continuously or intermittently), they may be considered an Australian resident unless it can be established their usual place of abode is outside Australia and they have no intention of taking up residence here.

Superannuation Test

This test covers Commonwealth Government employees and states that to be considered an Australian resident, the person must be:

A member of the superannuation scheme established under the Superannuation Act 1990.

An ‘eligible employee’ for the purposes of the Superannuation Act 1976.

If this test is met, their spouse (including same-sex and de-facto) and children under age 16 are also considered to be Australian residents for tax purposes

Double Tax Agreements

An individual can be a resident of more than one country at the same time. In this circumstance, a Double Tax Agreement (DTA) may operate to preclude or limit Australia’s taxing right over certain classes of income derived by an individual who qualifies as a resident of Australia for domestic law purposes, but is solely a resident of a treaty partner country for purposes of the relevant DTA.

Australia has entered into taxation agreements with many countries. They operate to prevent double taxation and fiscal evasion, and foster co-operation between Australia and other international tax authorities by enforcing their respective tax laws.

Australian Tax Treaties

Tax treaties generally override domestic income tax law provisions that produce an outcome inconsistent with the terms of the treaty. Australian tax treaties aim to provide:

The sourcing country with a taxing right over selected types of income, profits or gains, sometimes at limited rates.

Each country with the right to tax the income of it’s own residents under their own domestic laws, so the tax treaty will not always restate this rule.

Tax relief against it’s own tax if the income has been taxed in the country of source (in Australia, the general foreign tax credit provisions are applied).

If the country of residence has the sole taxing right over certain types of income, profits and gains, this is usually expressed as ‘shall be taxable only in that country’. Where the country of source imposes a limited rate of tax on selected types of income profits or gains (for example, a withholding tax), this is usually expressed as ‘may be taxed in that other state’. Most tax treaties also provide a ‘tie-breaker’ test under which a dual resident is deemed to be a resident solely of one of the two countries for tax purposes.

Find out more

The Three Stages In A Expats Life

Expat Financial Planning

Expat Superannuation

Expat Portfolio Management

Expat Tax Advice

Currency Exchange

Global Mobility Advisory Service

Expat Life Insurance

Expat Health Insurance

General Advice Disclaimer

The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Atlas Wealth Management Authorised Representative before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Atlas Wealth Management nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.