Australian becoming a NON Resident for tax purposes

[ThaiBunny]

As I said, I have a letter addressed to me from the Tax Office stating that the Thailand-Australia Double Tax Treaty applies in my circumstances and I remain a tax resident of Australia. Other posters here have a letter addressed to them personally from the Tax Office stating that the Thailand-Australia Double Tax Treaty does not apply in their circumstances and they are no longer a tax resident of Australia.

 

If you need certainty write your own letter asking if the Tax Treaty applies to you. It's not difficult; there's a contact form on the ATO Web site. 

 

Australian pensioners in Thailand are not ordinarily resident so different rules apply. There's no such distinction between "ordinarily" resident and "tax resident". However tax residents after five years of not being ordinarily resident can apply for a certificate exempting them from paying the Medicare levy

11 hours ago, LivinLOS said:

Being not ordinarily resident means your non domestic sourced income is (likely) treated differently.

My US Social Security is taxed at source with a withholding tax which is credited back in my Australian tax return subject to the usual rules

[thelovedone]

23 hours ago, Thaidaddy said:

I am a non-resident of Australia (for tax purposes). What I can tell you is that I can invest in Australian shares and pay no capital gains, but should such shares get a dividend payment then it will be taxed at the highest marginal rate. This same concept will apply if you are renting your house or earning any income in Oz. With this in mind it may well be better for you to remain a tax resident of Australia simply so that you get the step up approach to taxation. Obviously all depends on the amount of investment income you earn. Any Oz pension is not taxable in Thailand.  

I am also classed as non- resident for tax purposes. Below are three tax laws that affected me were.

 

1.Sold an investment property in Australia- Result: No 50 % capital gains deduction is allowed. I was taxed on 100% of the capital gains. Ouch... didnt see that one coming!

 

2. No tax free threshold applied  on any Australian  income. Result: 100% of income subject to income tax.

In my case i receive rental income.

 

3. Savings in Australian banks. Result: Interest paid on savings attract a 10% witholding tax.

[ThaiBunny]

4 minutes ago, thelovedone said:

I am also classed as non- resident for tax purposes

So clearly you have a document from the ATO that specifically says the Double Tax Treaty does not apply to you? Or you simply concluded off your own bat that it didn't apply and told the ATO that you're no longer tax resident?

[thelovedone]

4 minutes ago, ThaiBunny said:

So clearly you have a document from the ATO that specifically says the Double Tax Treaty does not apply to you? Or you simply concluded off your own bat that it didn't apply and told the ATO that you're no longer tax resident?

I have no ATO  document stating what you refer to.

But on lodging my return ,i was advised by my acccountant that based on my residential circumstances and the fact that worked in Thailand. That i would be considered as a non resident under the ATO domicile test.

That status has some pros and cons. Downside i already mentioned.

Upside was no payment of a Medicare levy and my Thai income was not subject to Austrailan taxation.

If i was an Australian tax resident then my Thai income would be subject to Australian tax.

 

So i accepted the advice of my long time accountant. And although i got hammered on the capital gains tax, self declaring as a non resident was the least complicated option.

I sold the property before consulting with  my accountant regarding CGT implications......  so my bad.

[1]

1 hour ago, ThaiBunny said:

So clearly you have a document from the ATO that specifically says the Double Tax Treaty does not apply to you? Or you simply concluded off your own bat that it didn't apply and told the ATO that you're no longer tax resident?

I find this extremely interesting what you were saying about the double tax treaty and how you are judged as it flies in the face of just about everything I've read.

 

Personally at this stage I'm not interested in It's going down the ruling path as it appears to me it is far too open to interpretation IMO and I assume it cannot be done with anonymity?

 

I appreciate you do not want to share the letter but I would be interested in hearing more general specifics with regards to your situation if you don't mind sharing. Particularly the what you believe impacted their ruling. 

 

For mine I'm in my mid 50s retired and derive my income from shares, both dividend and capital gains and rental property. I also currently return to Australia annually for a few weeks. No real superannuation to speak of and no hope of ever getting the pension.

 

Anyway I would really appreciate any further information you're prepared to share.

 

Cheers

[sikishrory]

Theres many things you need to do to be a non resident there.

Theres the 3 tests.

The "transition" period of about 3 years.

Theres how you have severed your ties with Australia which is a whole list of stuff.

Then theres the thing of paying tax in new country of residence.

There's your immigration status in new country and building a case there like utility bills and a home or rental. Even social and sport club connections. 

I am in a similar position to you.

I have contacted numerous (around 10) expat tax experts/professionals/lawyers in oz and Thailand over the last 2-3 years and gotten nowhere at all. In the last 2 weeks I have contacted in Thailand pwc, law alliance and Tilleke & Gibbins. All supposedly well know and respected and none have replied.

Its a really tricky thing and it shouldn't be.

A brief look at your starting post though leads me to believe you got a long road ahead with ties to Australia and a transition period that hasn't even begun.

 

 

[ThaiBunny]

12 hours ago, thelovedone said:

So i accepted the advice of my long time accountant.

It's great to hear that he reviewed the tax resident provisions of the Double Tax Treaty and formed the view that it didn't apply to you. Did he happen to mention why he formed that view?

[ThaiBunny]

11 hours ago, 1 said:

Personally at this stage I'm not interested in It's going down the ruling path as it appears to me it is far too open to interpretation IMO and I assume it cannot be done with anonymity?

Not sure why you think a ruling is open to interpretation. It's binding on the ATO once they've issued it to you. That's the reason why it can't be anonymous

[1]

7 hours ago, ThaiBunny said:

Not sure why you think a ruling is open to interpretation. It's binding on the ATO once they've issued it to you. That's the reason why it can't be anonymous

 I wasn't meaning you're ruling is open to interpretation I was meaning that the current legislation and rules are open to interpretation hence the requirement of a ruling to ensure accuracy.

[1]

14 hours ago, sikishrory said:

A brief look at your starting post though leads me to believe you got a long road ahead with ties to Australia and a transition period that hasn't even begun.

Yes that's why I'm looking to try to get a broad base of information to work from. My loose thinking assuming I wanted to stay in Thailand after my "extended holiday" would be to move out of the property market and into the share market looking for a portfolio of predominantly fully-franked shares. But that is just a loose idea assuming I become a non-resident for tax purposes. 

[sikishrory]

40 minutes ago, 1 said:

Yes that's why I'm looking to try to get a broad base of information to work from. My loose thinking assuming I wanted to stay in Thailand after my "extended holiday" would be to move out of the property market and into the share market looking for a portfolio of predominantly fully-franked shares. But that is just a loose idea assuming I become a non-resident for tax purposes. 

I think that is a much better approach. The property complicates things and is not a great investment anyway with capital gains and all. Shares better as theres no tax returns to do and no moving large amounts of money attracting austrac attention. If you decide to one day move back your money is there waiting. 

Do you use the BT or HUB24 platforms by any chance?

[1]

2 hours ago, sikishrory said:

I think that is a much better approach. The property complicates things and is not a great investment anyway with capital gains and all. Shares better as theres no tax returns to do and no moving large amounts of money attracting austrac attention. If you decide to one day move back your money is there waiting. 

Do you use the BT or HUB24 platforms by any chance?

No I'm not familiar with either of those platforms.

Is there something that they offer that would be of use to my situation do you think?

[sikishrory]

4 hours ago, 1 said:

No I'm not familiar with either of those platforms.

Is there something that they offer that would be of use to my situation do you think?

Just curious as I was recommended to switch from BT to Hub24 for better control and easier to understand interface.

Hub24 also allows my offshore salary to be directly transferred in from overseas and has swift code.

[MadMuhammad]

On 5/13/2019 at 4:47 PM, StevieAus said:

I think you are correct there Centrelink seem to be linked to the Immigration system as I know a couple of friends resident in Aus who over the years have had certain benefits automatically reduced for periods they were overseas.

People with big enough outstanding child maintenance debts can be restricted from flying internationally so I agree there must be some link 

[MadMuhammad]

On 5/13/2019 at 5:50 PM, Monkeyrobot said:

Also remember if you are a non resident you loose your Medicare entitlements so if you get sick and go back to Oz for treatment you could have problems. 

I read somewhere just regret you get 5 years grace 

 

If you're an Australian citizen and you live overseas. If you've moved overseas, you continue to be eligible for Medicare for 5 years. The 5 years starts from the date you first left Australia. You can't access Medicare services from outside of Australia.Apr 2, 2019

Medicare card - Who can get it - Australian Government ...

 

 

[MadMuhammad]

On 5/14/2019 at 9:07 PM, sikishrory said:

Theres many things you need to do to be a non resident there.

Theres the 3 tests.

The "transition" period of about 3 years.

Theres how you have severed your ties with Australia which is a whole list of stuff.

Then theres the thing of paying tax in new country of residence.

There's your immigration status in new country and building a case there like utility bills and a home or rental. Even social and sport club connections. 

I am in a similar position to you.

I have contacted numerous (around 10) expat tax experts/professionals/lawyers in oz and Thailand over the last 2-3 years and gotten nowhere at all. In the last 2 weeks I have contacted in Thailand pwc, law alliance and Tilleke & Gibbins. All supposedly well know and respected and none have replied.

Its a really tricky thing and it shouldn't be.

A brief look at your starting post though leads me to believe you got a long road ahead with ties to Australia and a transition period that hasn't even begun.

 

 

I don’t know if this helps 

 

https://www.ato.gov.au/Individuals/international-tax-for-individuals/work-out-your-tax-residency/

[Will27]

3 hours ago, MadMuhammad said:

People with big enough outstanding child maintenance debts can be restricted from flying internationally so I agree there must be some link 

Child supports debts/ departure prohibition orders are placed by CSA.

[1]

On 5/14/2019 at 3:34 PM, thelovedone said:

I am also classed as non- resident for tax purposes. Below are three tax laws that affected me were.

 

1.Sold an investment property in Australia- Result: No 50 % capital gains deduction is allowed. I was taxed on 100% of the capital gains. Ouch... didnt see that one coming!

 

2. No tax free threshold applied  on any Australian  income. Result: 100% of income subject to income tax.

In my case i receive rental income.

 

3. Savings in Australian banks. Result: Interest paid on savings attract a 10% witholding tax.

Would I also be riding assuming that you are not able to claim any deductions for expenses to derive that rental income?

 

This is my major reason for looking at moving completely into the share market to you have franking credits offset my tax liability.

[4MyEgo]

On 5/13/2019 at 7:04 PM, Thaidaddy said:

I can invest in Australian shares and pay no capital gains, but should such shares get a dividend payment then it will be taxed at the highest marginal rate.

I don't know who gave you this advice as it is partially correct, e.g. dividends are not taxed if they are fully franked, i.e. franked shares have the tax already paid out of them before you receive your dividend, so your fully franked dividend from, for example the CBA, ANZ banks is your net return, and there is no need to pay tax on it again. However if you buy unfranked shares, or partly franked shares, then you will have to pay 32.5% tax on the unfranked shares. 

 

You are correct about there being no capital gains tax being payable on your shares as a non resident.

[4MyEgo]

On 5/13/2019 at 7:36 PM, OzMan said:

They said that there was not a specified time but they generally took two years from first leaving to be the cut off to being a resident. I believe I can return every six months for two years and still be classed as a resident, after that I need to remain in Australia for six months and 1 day every year to remain a resident.

Most government department have different time frames.

 

From what I have read under the legislation, extensive legislation and precedents from court rulings is, that if you are out of the country for more than 183 days in a financial year, you are basically a non resident unless of course you can prove that your on a worldwide holiday travelling around and not being in one place at a time for that period which would establish you as having an abode overseas.

 

The onus will always be on the person to prove their status as a resident if they so choose to challenge the ATO and or any other department.

 

There are benefits of being a non resident, if you do not hold property in Australia, however if you hold property in Australia, you are literally in bed with the government on a 50/50 split after 32.5% of rent is taken as tax, add to that all the associated costs relating to the property, e.g. council, water rates, insurance, tenant insurance, maintenance, agents letting and reletting fees, advertising fees, vacancy factors if any, etc etc and that virtually gives you 50% of the rent, and lets not forget that capital gains tax from the day you departed, i.e. they back date the 183 days to the date you left and will charge you capital gains tax from the exchange date of the sale of the property.

 

There is also a plan, although hasn't been passed yet, but its to charge capital gains tax on your principal place of residence if you are a non resident, back dated to the date of purchase, yes the date of purchase, but like I said, it hasn't gotten through yet, although I would imagine after a few tweaks and Pauline is happy, it will go through, after all tax ia tax and non residents are non residents, who have no voting power, lame ducks ready to be taken out !

 

I could go on, but I won't, any questions, just quote me and I will come back to you.

[4MyEgo]

On 5/13/2019 at 7:37 PM, GreasyFingers said:

Centrelink deem me to be a non resident but the tax office has not picked up on this.

The ATO will only pick you up if you are audited and believe you me, if they do audit you, expect to pay a hefty fine with back taxes, if any, if the time ever comes, hopefully not for your sake, no doubt your accountant gets you to sign a waiver on each occasion because he/she knows they could be fined and stripped from practising if ever caught, at the extreme end of course, but why on earth would they risk it, because they have a waiver signed by you, look into it, if that turns out to be the case, you are a sitting duck.

[4MyEgo]

On 5/13/2019 at 7:42 PM, Mick501 said:

If you are deemed non resident, then firstly you lose your tax free threshold, so that you will be taxed at 30% from your first dollar, and then a sliding scale.

32.5% up to xyz and then it jumps again and then again.

 

This is a recent news article that some may be interested in regarding an appeal on residency: https://www.abc.net.au/news/2019-02-26/expats-given-certainty-on-residency-rules/10850232

[4MyEgo]

On 5/13/2019 at 8:50 PM, Monkeyrobot said:

Also remember if you are a non resident you loose your Medicare entitlements so if you get sick and go back to Oz for treatment you could have problems. 

This only comes into effect if you have been outside the country for more than 5 years, e.g. that is the way I have interpreted the legislation, as I have seen my doctors/specialists on 2 occasions when I returned and was reimbursed, both times being under 5 years.

 

I also advised Medicare via MyGov that I lost my card, i.e. it was due to expire while I was residing here in Thailand and I put down a mates address and they sent the new one there with 5 more years, I collected it when I returned, so there are more than one way to skin a cat so to speak.

 

Also would strongly suggest private health care cover if your looking at residing in Thailand, suffice to say, if you can't make it back to OZ, you will need to get it sorted here ASAP, expensive, but what's your health worth ?

[4MyEgo]

On 5/12/2019 at 8:45 PM, 1 said:

I'm an Australian resident currently residing in Thailand. Before I left Australia I did their tax wizard to determine my residency and for five year period I'm considered an Australian Resident for tax purposes.

Just remember the tax wiz is only as good as the information you completed, and I have to say 5 years sounds odd ?

 

I have been here 3.5 years, did all the research in the world and this is what I came up with.

 

1) Sell property because the non-resident tax and capital gains tax and the market falling wouldn't make it worth it for me, suffice to say your tax will be 32.5% as you probably already heard without any threshold, add to that the holding costs and it will more than likely be 50%, add the CGT and the market falling and you don't have to be Einstein.  I had been in property for 25 year so I have a fair idea what I am talking about, and just today I did a quick check on the Sydney market in a suburb where I lived, I sold my place just prior to my residency changing although copped a little capital gains tax as they go from the exchange date and not the settlement date, didn't bother me, wasn't that much anyway, but the two places I looked at today went like this, same complex, one sold in December 2016 for $880k, the other identical sold for $679,500 in December 2018, that's a drop of $200k in two years or 22.78%, so glad I sold ????

 

2) Investing in the ASX, Australian Stock Market will mean you won't be taxed as a non resident as long as you buy and sell fully franked shares, you might want to talk to your accountant as to what might be the best way to get around the change over, he may suggest sell and buy back in or something else ?

 

3) 10% withholding tax on money held in the bank, you have to notify them of your residency status.

 

4) Medicare gone after 5 years, renew via MyGov, if you like you can say you lost your card and they will send a new one to your Oz address, good for another 5 years, also get private health care cover here, just in case you can't make it back to Oz in an emergency, expensive but your health/life is worth far more than that, or self insure ?

 

5) You won't be able to vote

 

6) Australian Age Pension if you qualify, assets and income test means you have to return to apply and sit it out for two years before it can be made portable, e.g. you have to convince/establish to them that you are back for good, and once you get it, do what you want.

 

That just about covers it, however if your going to rent out your principal place of residence, get a valuation carried out on the date or just before you leave, from a qualified property valuer, not an agent, and ask him to value it as high as possible so as to minimise you future capital gains tax, if your in NSW send me a person message and we can discuss a little further.

[GreasyFingers]

38 minutes ago, 4MyEgo said:

The ATO will only pick you up if you are audited and believe you me, if they do audit you, expect to pay a hefty fine with back taxes, if any, if the time ever comes, hopefully not for your sake, no doubt your accountant gets you to sign a waiver on each occasion because he/she knows they could be fined and stripped from practising if ever caught, at the extreme end of course, but why on earth would they risk it, because they have a waiver signed by you, look into it, if that turns out to be the case, you are a sitting duck.

There is a clause in the tax return that asks if you are a tax resident that I mark yes, so the accountant is covered. As I have very little income from interest at 2% I am under the threshold so do not pay any tax. The return is really a formality in case I need to go back.

You mention Medicare in a later post. Each year I make a claim on Medicare when visiting friends and family, even if it is only an eye test.

[4MyEgo]

20 hours ago, 1 said:

This is my major reason for looking at moving completely into the share market to you have franking credits offset my tax liability.

Time for a coffee and have a read of the legislation which you can then make up your own mind which residency you will become : http://www.austlii.edu.au/cgi-bin/sinodisp/au/other/rulings/ato/ATOITR/1991/itr1991-2650/itr1991-2650.html?stem=0&synonyms=0&query=overseas abode

 

Happy reading ????

 

[sikishrory]

7 hours ago, 4MyEgo said:

There is also a plan, although hasn't been passed yet, but its to charge capital gains tax on your principal place of residence if you are a non resident, back dated to the date of purchase, yes the date of purchase, but like I said, it hasn't gotten through yet, although I would imagine after a few tweaks and Pauline is happy, it will go through, after all tax ia tax and non residents are non residents, who have no voting power, lame ducks ready to be taken out !

I think the goverment indicated in March that this will likely be scrapped. I havn't checked but I think no official announcement has been made yet. Theres a video of them discussing it in parliament and it is clear that they have no idea <deleted> they are talking about themselves in regards to how it would work

[sikishrory]

6 hours ago, 4MyEgo said:

Just remember the tax wiz is only as good as the information you completed, and I have to say 5 years sounds odd ?

 

I have been here 3.5 years, did all the research in the world and this is what I came up with.

 

1) Sell property because the non-resident tax and capital gains tax and the market falling wouldn't make it worth it for me, suffice to say your tax will be 32.5% as you probably already heard without any threshold, add to that the holding costs and it will more than likely be 50%, add the CGT and the market falling and you don't have to be Einstein.  I had been in property for 25 year so I have a fair idea what I am talking about, and just today I did a quick check on the Sydney market in a suburb where I lived, I sold my place just prior to my residency changing although copped a little capital gains tax as they go from the exchange date and not the settlement date, didn't bother me, wasn't that much anyway, but the two places I looked at today went like this, same complex, one sold in December 2016 for $880k, the other identical sold for $679,500 in December 2018, that's a drop of $200k in two years or 22.78%, so glad I sold ????

 

2) Investing in the ASX, Australian Stock Market will mean you won't be taxed as a non resident as long as you buy and sell fully franked shares, you might want to talk to your accountant as to what might be the best way to get around the change over, he may suggest sell and buy back in or something else ?

 

3) 10% withholding tax on money held in the bank, you have to notify them of your residency status.

 

4) Medicare gone after 5 years, renew via MyGov, if you like you can say you lost your card and they will send a new one to your Oz address, good for another 5 years, also get private health care cover here, just in case you can't make it back to Oz in an emergency, expensive but your health/life is worth far more than that, or self insure ?

 

5) You won't be able to vote

 

6) Australian Age Pension if you qualify, assets and income test means you have to return to apply and sit it out for two years before it can be made portable, e.g. you have to convince/establish to them that you are back for good, and once you get it, do what you want.

 

That just about covers it, however if your going to rent out your principal place of residence, get a valuation carried out on the date or just before you leave, from a qualified property valuer, not an agent, and ask him to value it as high as possible so as to minimise you future capital gains tax, if your in NSW send me a person message and we can discuss a little further.

I was advised by a number of people to close all bank accounts.

RE: Voting... I believe you also need to remove yourself from the electoral roll.

Number 1 "selling property" also applies if you move back to Australia and then sell it. They will still tax you crazy CGT on the rise in value for the years you were away.

[ripstanley]

After this weekend and if there is a change of government then expats problems will disappear for a few months or more. All departments will be trying to crawl up to the new government.

[1]

On 5/17/2019 at 12:30 PM, 4MyEgo said:

 

You are correct about there being no capital gains tax being payable on your shares as a non resident.

I missed this in @Thaidaddy original post.

 

Are you sure this is correct? It seems very odd to me.