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If you move to or from Australia, your tax obligations may not automatically change. The Australian Taxation Office (ATO) looks at your tax residency to decide how your income is taxed. This popularity determines what you want to declare and which rules apply.
Understanding your function permit you to live compliant and keep away from overpaying tax. For Australian expats or those shifting overseas, Bates Cosgrave gives a detailed guide on property tax for expats in Singapore that allow you to plan for residency and property-associated tax matters.
What Is Tax Residence?
Tax residence isn’t the same as citizenship or visa reputation. It relies upon on in which you live, what you do, and where you propose to stay.
The ATO exams:
- Where you usually live
- Where your family lives
- Where you hold property or businesses
- Your visa type and plans for returning or settling
You can be a tax resident even if you live overseas part of the year. You can also be a foreign resident while living in Australia temporarily.
How the ATO Decides Your Residency
The ATO uses several tests. You only need to meet one to be considered a tax resident.
- Ordinary residence test – Are you living in Australia regularly?
- Domicile test – Is Australia your permanent home?
- 183-day test – Did you spend more than half the year in Australia?
- Superannuation test – Are you in a government super fund while working overseas?
The ATO website has helpful tools. You can use “Are you a resident?” or “Leaving Australia?” to check your status.
What Happens If You Are an Australian Tax Resident
You are taxed on your worldwide income. This includes wages, investments, and foreign earnings. You can claim the tax-free threshold (up to $18,200) and use tax offsets if you paid tax overseas.
You may also:
- Claim deductions
- Be eligible for CGT discounts
- Get exemptions on your main residence
- Access most tax benefits available in Australia
What Happens If You Are a Foreign Tax Resident
You only pay tax on income earned in Australia. You cannot claim the tax-free threshold. Your tax rate is higher.
You must still lodge a return if you earn money in Australia. PAYG tax is usually withheld by your employer. You may claim an exemption from the Medicare levy.
You are also taxed on certain Australian assets under Capital Gains Tax (CGT). But you do not need to report foreign income.
Working holiday makers and Pacific Australia Labour Mobility (PALM) workers have special tax rules. Their rates and conditions are different.
If you leave the country, you may be able to withdraw your super. This is called the Departing Australia Superannuation Payment (DASP).
Are You a Temporary Resident?
Temporary residents are usually people on temporary visas. If your partner is not from Australia and you both live here temporarily, you may qualify.
As a temporary tax resident, you must:
- Declare income from Australian sources
- Report only limited foreign income
- Pay CGT only on Australian property
- Ignore foreign assets for CGT purposes
When your temporary residency ends, and you remain a resident, your overseas assets are considered newly acquired at their current market value. You can also claim DASP when you leave.
Capital Gains Tax and Residency Changes
When your tax residency changes, your CGT position also changes.
If you stop being a tax resident, it triggers a CGT event. It’s treated as if you sold your overseas assets. You may qualify for the 50% CGT cut price if you held the belongings for over 12 months.
You can choose not to trigger CGT at that time. In that case, your assets become taxable Australian property going forward.
If you bought assets after 8 May 2012, you may not get the CGT discount once you become a foreign resident. The rules are stricter if the change happens after this date.
Medicare Levy and Surcharge
You can also ought to pay the Medicare levy, until you qualify for an exemption. Foreign citizens often don’t pay this levy.
If you don’t keep private health cowl and earn over a sure earnings, you may pay the Medicare Levy Surcharge. It’s critical to test your duties every year.
Getting a Tax Residency Certificate
If you earn money overseas, foreign tax authorities may want proof that you pay tax in Australia.
You can apply for a Certificate of Residency from the ATO. You need to complete a form. Processing takes about 28 business days.
This document helps you avoid double taxation. It also supports your claim for a foreign income tax offset.
What If Your Residency Changes During the Year?
Your tax status can change partway through a financial year. If it does, your tax-free threshold is reduced. It’s based on how many months you were a resident.
In your tax return, you must declare:
- The date your status changed
- How long you were a resident that year
It’s also a very good concept to replace your withholding statement with your company. This ensures the proper quantity of tax is deducted from your wages.
Telling the ATO About Your Residency Status
You don’t have to contact the ATO directly. Just update your status in your next tax return.
Tick “yes” to “Are you an Australian resident for tax purposes?” even if you were only a resident for part of the year. Then provide:
- The date your residency changed
- The number of months you were a resident
To ensure your company deducts the right quantity of tax, post a brand new withholding assertion.
What If Your Employer Gets It Wrong?
Sometimes, your employer may treat you as a foreign resident when you’re not. This can lead to extra tax being withheld.
To fix it, submit a new withholding declaration. If too much tax has already been taken out, you’ll get a refund when you file your return.
Working Remotely from Another Country?
If you work for an Australian company but live abroad, your tax obligations depend on your residency status.As a tax resident, you still pay tax on all your income.
For Australians living abroad, or expats managing property and tax obligations in other countries, Bates Cosgrave’s guide on property tax for expats in Singapore provides detailed guidance to ensure compliance and optimise tax outcomes.
How to Declare Foreign Income
If you are a tax resident, you must report all income — including from overseas. This includes:
- Salary
- Dividends
- Interest and other investment returns
You may claim a foreign income tax offset for taxes paid overseas. You must convert all foreign income into Australian dollars before reporting.
If you are a foreign resident, you only declare income from Australian sources. You cannot claim offsets for taxes paid in other countries.
For Australians living abroad, or expats managing property and tax obligations in other countries, Bates Cosgrave offers a full guide on property tax for expats in Singapore to help ensure compliance and optimise tax outcomes.
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