Are You Resident or Non-Resident for Tax Purposes?
If you have found an exciting opportunity overseas, you may be getting ready to pack your bags and head off into the sunset. This type of job could lead to other opportunities in your newfound land and you are definitely excited at the prospect, even though there may be a degree of uncertainty. While there are many things to consider as you get ready to depart, you must make sure that you handle your tax affairs correctly from the outset. In particular, you need to determine whether you are going to remain an Australian resident for tax purposes or not, as this could make a significant difference to your future. What do you need to think about?
Understanding the Challenge
Some people confuse the words 'citizen' and 'resident'. However, the ATO has very strict rules depending on whether they classify you as a resident for tax purposes or not. You can still be an Australian citizen but not be a tax resident, and in this case, you may not be responsible to pay the ATO taxes based on your worldwide income.
Non-Resident Implications
If you are categorised as a non-resident for tax purposes, then you will only be taxed on any money that is sourced in your homeland. Crucially, you won't need to pay any Medicare levy either, but that also means that you will not be entitled to the associated benefits.
Providing Evidence
However, there are many different rules here, and generally speaking, you will need to provide evidence to show that you have severed your connections with Australia before your status can be changed. You may need to take a residence and a domicile test to determine exactly where you stand, and the rules here can be very complicated.
Taking the Tests
For example, will you maintain a permanent home in Australia while you are working overseas? If so, then you are still an Australian resident for tax purposes. You will also be included in this category if you spend 183 days per income year in the country, whether on a continuous basis or with breaks in between.
Getting It Right
As this can be such a complicated area to navigate, you will need to get professional advice. Talk with a tax consultant as soon as possible so that you can establish whether you will be non-resident or resident and can make arrangements to deal with the tax people accordingly.
