Are You a Resident or Non-Resident for Australian Tax Purposes? Don’t Get Caught Out!

In order to know your tax responsibilities in Australia, you have to know whether you are considered a resident or non-resident for Australian tax purposes. This may seem clear but if you are working overseas, travelling often, or you do not have a permanent home in Australia, you may think you are exempt from Australian taxation laws when you really aren’t.

What is a Resident for Tax Purposes?

If you reside in Australia, you have a home and you’re settled in Australia, it is quite clear, according to the ATO (Australian Taxation Office), that you are considered a resident and that you are subject to Australian taxation laws. But if your situation is not as clear, you might want to check with the ATO to see whether you are considered a resident.

The ATO has a number of detailed residency calculators on their website which you can access here. Remember that you only need to pass one of these to be considered as an Australian resident for tax purposes.

The reason why residency for tax purposes is complex is because there is not one defining factor that confirms your status. The ATO looks at a number of factors in your circumstance to define your status. Your citizenship may have nothing to do with your tax responsibilities. Even if you are a citizen of another country, you can be considered a resident of Australia for tax purposes, depending on your activities.

For example, you can be considered a resident if you:

  • Perform your day to day activities, especially those of a leisurely kind, in Australia, even if you are moving often without a permanent residence.
  • Have a business, assets, or a family in Australia, even if you stay elsewhere.
  • Have the intention to stay in Australia as soon as you arrive.

Some of your responsibilities as a resident for tax purposes include:

  • Lodging tax returns
  • Declaring all sources of income receivedworldwide, meaning all income earned in Australia as well as overseas
  • Paying the 2% Medicare levy, which automatically comes out of your income, if you earn over $18,000 a year

What is a Non-Resident for Tax Purposes?

If you do not pass the tests provided by the ATO, you may be considered a non-resident (also called “foreign resident” meaning that you do not need to claim your overseas income in your Australian tax return. But it’s best to have the ATO or an accountant look into your situation to make sure you do not make an incorrect conclusion.

As a non-resident for tax purposes, you will have to lodge a tax return if you earned any income in Australia (eg. rental income from investment properties located in Australia, shares traded on the Australian Securities Exchange, etc.).

Why Does All This Matter?

In 2016, a Malaysian investor suffered the consequences of assuming his non-residency status for his tax responsibilities in Australia. Sir Yii Ann Hii was faced with an order from the ATO to pay $50m in taxes because ATO had considered him to be an Australian resident for tax-purposes for a number of years, simply because his wife and children lived in Australia. Sabrina Ong, who is a partner here at Fortiz Accountants, commented on this case, informing of the many ways that the ATO can decide your residency status. Read more here.

Your Worldwide Tax Responsibilities

If you are a resident and you are claiming income from Australia and overseas, it’s possible that that income overseas is also subject to taxation laws in its source country. Australian’s double tax agreements (DTA) ensures that you don’t have to get taxed twice for the same income.

For a comprehensive list of countries with a tax treaty with Australia, click here.

What You Should Do Now

Know your status as soon as possible to avoid incurring payments that you are not aware of. Refer to the ATO’s comprehensive residency tests (above) to see whether you are subject to paying Australian taxes and to know what you have to claim in your next tax return. If you are still unsure about your tax responsibilities as a resident or foreign resident, an accountant will be able to help you!

 

Disclaimer: This blog post has been simplified to cover the common scenarios. This should not be construed as advice from Fortiz Accountants. There are many other factors to be considered and each case is unique. Therefore, we encourage readers of this blog post to contact Fortiz Accountants for assistance with their specific circumstances.

 

Our accountants are well-versed in the complexities of Australian taxation laws. If you are unsure about your residency status, or youre concerned about income from employment and investments overseas, contact our accountants here at Fortiz Accountants! As registered tax agents, we can also help you prepare and lodge your tax returns. Most importantly, we can help you to ensure that you fulfil all your tax obligations in Australia.

Contact us and see how we can assist you!

What To Do Now That You Have Just Migrated to Australia

Are you a new migrant to Australia? Welcome! Here is a list of important things to do and consider now that you’ve arrived in Australia.

Get a Mobile Phone in an Australian Network

A mobile phone with connection to the Australian network will make sure that you can keep in touch with your friends and family in Australia and overseas. You might also need to make a lot of calls within the first few weeks of your arrival, such as calling for a taxi service. A mobile phone with internet access will also give you access to most everyday services online, without needing access to a computer or Wi-Fi.

Consider:

  • Pre-paid or post-paid (contract) phone plans? Note that post-paid phone plans will require you to make regular payments monthly (depending on the plan) and might have extra requirements.
  • Which network? Australia has plenty of network providers, such as Optus, Telstra, or Vodafone. Do your research and see which provider has a plan that will suit your needs or price range.

Find a Place to Stay

Do you have a place to stay? You may choose to rent an apartment or house before choosing where you would like to live long-term.

Here are a few rental sites to get you started:

Domain

property.com.au

realestate.com.au

Do your research in advance because your choice will depend on your needs, preference or budget. Know that there are a lot of cheaper options for you in the interim period, such as hostels and Airbnb, instead of hotels.

Know How You Will Travel

Do you know how you will get where you need to go? A few transportation options are renting/leasing a car, buying a car, or public transportation.

Consider:

  • Renting and buying can end up costing you the same amount. You can find some guide questions to help you decide here .
  • Make sure you have at least third party insurance for your car! This will save you money if you are ever in an accident.
  • Public transport may be adequate for you if you are intending to mostly travel around Melbourne’s CBD. Driving and parking is difficult in the city! Find out more about Melbourne’s public transport here.

Convert your Driving Licence

If you hold an international driver license, VicRoads may or may not recognise your licence or your driving experience depending on which country your license was issued to you or your age. Note that your right to drive in Victoria using your foreign license also depends on whether you hold a temporary or permanent visa.

Consider these:

If you are staying in Australia for more than 6 months, you must get a Victorian issued drivers’ license.

If you plan on using your license for identification purposes, your license must be issued in Australia.

This is especially important for the 100-point ID check that is used by the Australian government in order to confirm your identity. You will need to pass the 100-point ID check to register for some of the services on this page, such as Centrelink.

Register with Centrelink

Centrelink is a government program, part of the Department of Human Services, in charge of providing government payments to Australians, visa holders, students, seniors and more. For example, if you have dependent children, you can be eligible for the Family Tax Benefit and receive payments for your family. Or if you haven’t found employment after a certain amount of time, you can receive unemployment payments while you continue your search for a job.

Visit the Centrelink website to see a range of benefit payments you can be eligible for.

If you have never dealt with Centrelink, you will need to make an appointment at your nearest Centrelink office and apply for a Customer Reference Number (CRN) with valid documents to confirm your identity.

The CRN acts as a key for your Centrelink records. Once you receive your CRN you can create an account online and start using services.

Enrol for Medicare

Medicare is a government scheme which offers a range of services, including free or discounted access to public health services, doctors and emergency treatment in a public hospital. In order to access these services you must enrol for Medicare and receive a Medicare card.

To to enrol, visit: How to enrol or re-enrol in Medicare.

Start Looking For a Job

This will be one of your priorities but it can also be very challenging. Here are few sites where you can start your job hunt:

SEEK

Indeed

Job Search Australia

But don’t forget:

  • You may need to re-write your CV. What Australian employers expect from your CV to look like may be very different from what’s expected in your home country.
  • You may wish to look for a template on the internet or seek the services of a resume writer (just search up “resume writing services” on the internet and see what’s available for you).
  • Apply for as many jobs as you can. It will increase your chances of being hired.
  • Network, network, network! Some jobs are not advertised.
  • Remember that some jobs may require additional certification, such as those around children or those involving food and drinks.

Apply for a Tax File Number (TFN)

As a resident in Australia, a Tax File Number (TFN) is needed for many aspects of your life here.

You will need it in order to start getting paid by your employer, to access some government services/benefits or to apply for an Australian Business Number (ABN) which you will need to start a business. Holding a TFN will ensure that you are taxed correctly and will also allow you to lodge your mandatory tax return.

Your tax file number (TFN) is your personal reference number in the tax and super systems.It is an important part of your tax and super records as well as your identity, so keep it secure. Your TFN is yours for life. You keep the same TFN even if you change your name, change jobs, move interstate or go overseas.

Visit the Australian Taxation Office (ATO) to apply for a TFN.

Set Up a Bank Account

There is a large range of banks in Australia to choose from. It’s best to do your research to find the bank that will suit your needs. You will also need to provide your bank details to your employer once you have secured a job.

Be sure to provide you TFN to your chosen bank so they do not withhold tax from the interest you earn in your account at the highest marginal tax rate (currently 45%).

Apply for Superannuation

Superannuation is compulsory when you work in Australia. This is basically a retirement fund that you will be able to access after you retire. Your employer is liable to pay the superannuation guarantee contribution (currently 9,5%) on your ordinary time earnings into your chosen fund.

In most cases, you have the option of choosing your superannuation fund or allowing your employer to choose for you. More information is available here.

Understand your Australian Tax Obligations

Now that you are in Australia, it is very important to understand your tax obligations. Did you know that you have to claim your overseas income for taxation? This does not just mean money earned from employment overseas, but also income earned from investments, businesses and pensions. You will penalised if withhold this information on your claim, even if it is unintentional. An accountant can help you avoid this trouble early on.

Disclaimer: This blog post has been simplified to cover the common scenarios. This should not be construed as advice from Fortiz Accountants. There are many other factors to be considered and each person’s situation is unique. Therefore, we encourage readers of this blog post to contact Fortiz Accountants for assistance with their specific circumstances.

 

If you need help in understanding your tax responsibilities in Australia as a new migrant we can help you! Our accountants can help you make sure all your financial records, both in Australia and overseas, comply with Australian law. We can help keep track of your finances and ensure you successfully lodge your tax returns. Additionally, most of our accountants and staff have either been there, done that, so they are more than happy to advise you.

 Contact us and see how we can assist you!

Australia & Malaysia Agree to Share Financial Data to Fight Tax Evasion

From time to time, Fortiz Accountants receive calls and emails from concerned Malaysians living in Melbourne and Malaysians planning to migrate to Australia regarding possible exchange of financial data of tax residents between Malaysia and Australia.

Some of the common questions relate to the transfer of EPF funds to Australia, transfer of cash savings or cash gifts received from parents to bank accounts in Australia, possible capital gains taxes implications on the sale of properties in Malaysia after moving to Australia, Australian tax on employment or business income earned in Malaysia while the rest of their family members live in Australia.

The 6-month rule, the 6-year rule and the other taxation topics, such as, taxation on worldwide income earned by Australian tax residents are often explained. During tax advice/tax planning sessions, we have provided clarity to clients regarding their personal circumstances and how the various tax laws apply to them. Our advice have included appropriate timing for disposal of assets, obtaining market valuations of assets, keeping important records and paper trails, and so on.

 

One of the partners at Fortiz Accountants moved from Malaysia to Australia over 20 years ago. Contact us for assistance if you are migrating from Malaysia to Australia, a recent migrant from Malaysia, planning to purchase an investment property in Australia or a Malaysian entrepreneur planning to start a business in Australia.

FY 2017 Year End Tax Tips for Individuals

With just 6 days to the end of the financial year, here are some tax tips for individuals to reduce your taxes.

Record Keeping

We cannot emphasis this enough. Too often, we meet clients who have deductible expenses which they incurred for income producing purposes BUT they have misplaced or forgotten to keep their receipts.

If the total claim for work-related expenses is more than $300, ATO requires written evidence to prove your claims. Generally, you need to keep these for five years from when you lodge your tax return in case of a tax audit.

If you are tech-savvy and prefer to do things on the go,  check out the app developed by ATO to help taxpayers keep tax deductions and income records all in one place!

Motor Vehicle Log Books

If you plan to claim motor vehicle deductions, you would need to keep a log book.

Under this method you need to:

  • keep a pre-printed logbook (available from stationery suppliers) or make your own logbook
  • have written evidence of your fuel and oil costs, or odometer readings on which your estimates are based
  • have written evidence for all your other expenses.

You can create a logbook and record work-related car trips using the myDeductions tool in the ATO app. If you use and record your trips using myDeductions, you don’t need to keep paper records as well.

Donations

Donations to charities which are deductible gift recipients (DGR) are tax deductible. To check if the charity is a DGR, you can check on the ABN lookup portal. It is important to note that crowdfunding campaigns may not be tax deductible.

Salary Packaging

If your employer provides salary packaging benefits, it will be worthwhile exploring and discussing these options with your trusted accountant (that’s us!). Some expenses which can be salary sacrificed include cars, health insurance, loans, school fees, childcare fees and other expenses such as mobile phones.

Super Contributions

You can make concessional contributions (“before tax” contributions) which are tax deductible, and are generally taxed at 15% within superannuation. Such contributions are capped at $30,000 per year if you are under 50.

If you make contributions to a complying superannuation fund or a retirement savings account (RSA) on behalf of your spouse (married or de facto) who is earning a low income or not working, you may be able to claim a tax offset. You will be entitled to a tax offset of up to $540 per year if you meet certain conditions.

Always seek the advice of your financial planner or your accountant who must have an AFS licence to provide advice on superannuation. [Fortiz Accountants holds an AFS Licence, so feel free to make an appointment to chat with us about superannuation.]

Private Health Insurance

If you are a high income earner, the Medicare levy surcharge (MLS) payable. MLS is designed to encourage individuals to take out private hospital cover, and where possible, to use the private hospital system to reduce demand on the public Medicare system. The MLS is payable in addition to the Medicare levy. The base income threshold (under which you are not liable to pay the MLS) is $90,000 for singles and $180,000 for families. To avoid this surcharge, all you need to do is to take out private health insurance cover.

Income Protection Insurance

The cost of premiums for income protection insurance are tax deductible.

Premiums paid for other insurance cover (life insurance, trauma insurance and critical care insurance) are not tax deductible. However, these insurances may already be paid via your superannuation fund.

If you do not hold income protection insurance, life insurance, trauma insurance, or TPD insurance, we are able to assist by arranging for our referral partner to contact you.

Capital Gains/Losses from Shares or Properties

Any capital losses can be used to offset capital gains (but not employment income). If you do not have capital gains, the capital losses can be carried forward to offset capital gains in future years. Therefore, it may be worthwhile to look at your non-performing investments to see if any investment should be sold before 30 June, so that the capital loss can offset against the capital gain.

If you intend to sell any investments and realise a capital gain, consider deferring the sale till after 1 July 2017 to ensure any Capital Gains Tax liability is deferred for another year.

We would be more than happy to assist our clients with CGT calculations prior to EOFY, so that informed decisions can be made.

Other Matters (Family Tax Benefits)

You have 1 year to submit a lump sum claim and confirm your income for that financial year. That means that you will need to submit your income tax returns for FY 2016 by 30 June 2017, or FY 2017 by 30 June 2018. Failure to lodge your tax returns on time may result in Centrelink cutting your family assistance payments.

 

Hate being hit with a huge tax bill year after year? Contact us to make a tax planning appointment.

Are You a Resident for Australian Tax Purposes?

Determining whether you are a tax resident in Australia involves more than the commonly known 183-day test. There are a few other tests.

The primary test of tax residency is called the ‘resides test‘. If you reside in Australia, you are considered an Australian resident for tax purposes and don’t need to apply any of the other residency tests.

If you don’t satisfy the resides test, you’ll still be considered an Australian resident if you satisfy one of three statutory tests:

  • The domicile test: You’re an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.
  • The 183-day test: If you’re actually present in Australia for more than half the income year, whether continuously or with breaks, you may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here.
  • The superannuation test: This test ensures that Australian government employees working at Australian posts overseas are treated as Australian residents.

The ‘resides test‘ may involve ATO taking into account any or all of the following factors in determining where you reside:

  • intention or purpose of presence
  • family and business/employment ties
  • maintenance and location of assets
  • social and living arrangements.

This is where it seems that a Malaysian tycoon ended up in a quandary. ATO deems him to be tax resident while he believes he is not due to living in Australia for only short periods and below the 183 days per year. The case is still ongoing as of the date that this blog post was written.

Further information on ATO’s website:

ATO Residency Tests
Residency – Resides Test

The Star News Articles:

Malaysian timber tycoon in RM160mil Australian tax quandary
Malaysian timber tycoon sues Australian government in tax dispute

Sabrina Ong is a partner at Fortiz Accountants. If you are migrating from Malaysia to Australia, a Malaysian entrepreneur planning to start a business in Australia or a recent migrant from Malaysia, make an appointment at either one of our offices to find out how we can assist you.

Search

+