If you’ve made the exciting move from Australia to foreign shores, you’re probably enjoying learning all about your new home and having interesting cultural experiences. But as well as all the fun, there are many practicalities you need to consider, including filing your Australian tax return. When it comes to doing your taxes back home, avoid these five common mistakes expats make with their Australian tax returns:
1. Not correctly identifying themselves as a resident or non-resident
This is potentially the biggest and most costly mistake you can make. Generally, you will be classed as an Australian resident if you’re overseas temporarily. If you are a non-resident – so you plan to live and work abroad permanently – you may not need to file a tax return, unless you have Australian income.
2. Using estimates rather than actual figures
Use accurate figures when filling out your tax return, not estimates. The ATO will check the figures you’ve entered against sources, and even an estimate that is off by a few hundred dollars could catch their attention.
3. Not declaring overseas income
Even though you may not be taxed on it, you still need to declare any foreign income if you’re an Australian resident for tax purposes – even if tax was deducted in the country you earned it.
4. Not including income from property rentals
You should claim income that you’ve earned from any property you rent out each year. If you only rent it out for part of the year, make sure you adjust your deduction claims based on how long the property was rented out for.
5. Not backing up claims with evidence
If you don’t have receipts for your expenses, you can only claim up to $300 worth of work-related expenses. For everything you put on your tax return, ensure you have the evidence to back it up. Use a folder with labelled sections to keep yourself organised and save yourself last minute stress.
If you’d like the peace of mind that comes with having your Australian tax return completed by an expert, contact Expat Tax today. As expats ourselves, we understand the complexities of your situation and can ensure you stay on the right side of the tax man.
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Comments 8
I am US citizen intending to work from January to August (8 months) in a IT project in Australia. I am paid by a US company in US$ in the US.
– Do I have to pay taxes in Australia?
– Am I considered permanent resident in Australia for tax purposes?
– Are Australian non-resident tax rates lower or higher than resident?
– What tax credit can I claim in my US tax return?
Best regards,
Ernst.
Author
Hi Ernst,
Thanks for visiting our website and thanks for your questions.
Do you have to pay taxes in Australia?
Firstly, based on what you have written, it appears that you will be an Australian taxation resident (from January) as you will pass at least two of Australia’s 4 residency tests. This means that you WILL be required to pay taxes in Australia regardless of whether your salary is paid by a US company or by an Australian company. Salaries, wages and other similar remuneration are generally deemed to be sourced where the employee carries out their employment activities. Thus your income will have an Australian source and will be taxable in Australia.
Are you considered permanent resident in Australia for tax purposes?
I presume that you will be travelling to Australia on category of visa that is classed as a ‘Temporary Visa”. If you have a temporary visa, and neither you or your spouse is an Australian resident within the meaning of the Social Security Act 1991 (i.e. meaning that you and/or your spouse are not an Australian citizens or permanent residents), then you you will be classed as a temporary resident for Australian tax purposes.
This means you only declare income that you derive in Australia, plus any income you earn from employment performed overseas for short periods whilst you are a temporary resident of Australia. If the latter occurs and you pay tax in another country for the income you earned overseas in that foreign country, you will be entitled to a Foreign Income Tax Offset in relation to the foreign taxes paid.
Beyond that for Australian taxation purposes, any other foreign income that you earn (i.e. income sourced from outside of Australia) will not be taxable in Australia.
Are Australian non-resident tax rates lower or higher than resident?
Non-resident rates are the same as resident rates with the exception of the first two marginal tax brackets. Australian residents are entitled to a tax-free threshold of $18,200, with the next $18,800 (i.e. from $18,201 – $37000) taxed at 19%.
Non-residents on the other hand do not have any tax-free threshold and are taxed at the rate of 32.5% up to $37,000. So that’s the difference. Beyond $37,000, resident rates and non-resident rates are the same. To understand more take a look at:
Australian Individual Income Tax Rates
What tax credit can I claim in my US tax return?
Unfortunately we do not prepare US tax returns so we would need to refer you to our US tax colleagues American Tax for Expats. Reach out to Glenn Hines at American Tax for Expats as he will be able to assist.
Ernst, thanks again for your questions and best of luck with your move to Australia. Feel free to reach out to us to Book an Appointment with us if you need further Australian tax advice, and contact us,/a> when you need your Australian taxation return prepared as we’d be more than happy to assist.
Regards
Shane Macfarlane
Hello,
I am trying to work out the apportion of discount I can apply to my one CGT Event where I sold my house.
I have no losses coming forward.
I Bought it 01/07/1995 and lived in it until I rented it out on 01/10/2003.
I sold it in 01/03/2018.
I have worked out that my current year’s capital gain is $132348 after applying the 6 year rule exemption.
I left Australia in 2003 and have never been back and so I am classified as a foreign resident.
I understanding is that I lost the 50% discount after 12th of May 2012 but was told I could get a discount for the period of renting between 01/10/2009 (After the 6 year rule expired) & May 2012.
2009 value $300K
2012 value $340k
Can you tell how to work it out or give me the figure so that I can enter it into my tax return?
This is the last thing I need to do to complete my TR.
Regards,
Gary Hunt.
Author
Hi Gary,
Thanks for your message. Calculating the net capital gain by factoring in the pro-rata CGT discount that you’re entitled to can be a little tricky, that’s for sure.
Our team would be more than happy to perform the calculation for you however, that would come at a cost, so perhaps the best information that I can provide you is to point you in the direction of a CGT worksheet that the ATO provide for that very purpose (ie. calculating the CGT discount available to non-residents post 8th May 2012). I’ve pasted the link in below for you:
CGT Discount Worksheet for Non-residents
Take a look at that as it should help you calculate the gain. If you are still having difficulties after that, feel free to reach out to our team at info@expattaxes.com.au as we’d be more than happy to assist.
Regards
Shane
I am considering an offer of employment in Saudi Arabia with an international company as an ongoing employee.
The initial plan is for my wife wants to stay in our house in Australia and visit me in the school holidays as she is a teacher. My daughter will be starting university next year in Australia.
Assuming I will not qualify as a non-resident for tax purposes as the house is in both our names and my wife will remain here?
Any advice would be greatly appreciated to help decide on job offer.
Best regards
Alex
Author
Hi Alex,
Just on the face of it, it looks as though you’re residency status is indeed likely to lean towards Australian tax residency, however, it’s impossible to state this definitively based on the little information that we know.
When attempting to determine a person’s residency status for Australian taxation purposes, one must first assess ALL of the facts and circumstances of a taxpayer’s life, and on balance, residency or non-residency will be determined based on the weight of factors.
Accordingly, I can’t really help you through this forum sadly, as we really do need to run through all of the facts and circumstances of your life. We’d also need to run through the structure and details of Australia’s residency rules and we’d then need to apply those to the facts and circumstances of your life.
Only then would we be able to make an assessment as to your residency status for Australian taxation purposes.
As this takes quite some time, I’d recommend booking an appointment with me, using our online booking functionality – take a look below:
Book an Appointment
Finally, I wish I could have been more help to you here however we simply don’t have enough information to go on.
Thanks again for your question though, and if we don’t get an opportunity to speak in person, sincerely, I wish you the best of luck with your decision, and potentially your relocation to Saudi Arabia.
Thanks
Shane
Hi
Im planning to leave australia and work online abroad. i sell goods in australia, i also buy from an australian supplier.
I already have a quote for $1500 from another non-residency expat tax expert who also specialises in HK company structure setup. The $1500 does not include the HK setup structure, so there is more costs after the initial $1500 which i believe is just for advise and a setup ‘kit’. He was recommended by a friend though, but i thought i would ask around to see if i was getting ripped off or something.
Please get back to me thank you.
Author
Hi Brendon,
Thanks for your message – there’s definitely quite a bit to consider. Accordingly, I’ll send you an email so that we can have a quick discussion offline.
Cheers
Shane