So you’re about to jump on a plane and head overseas to start a new chapter of your life. You’ve got everything ready – suitcase packed, furniture stored, passport updated. You’ve got travel plans and the dream job secured.
But did you know about the tax implications that will be in place while you are overseas? Make sure you get to know what your responsibilities are when you’re overseas to avoid owing any money to the Australian Government or Australian Taxation Office.
You’ve moved overseas and found an amazing job. That doesn’t matter to the Australian Government, right?
Wrong. You will still be required to lodge an Australian tax return if you are still an Australian citizen and have found employment overseas. You will also have to declare any income earned from foreign employment, as well as any exempt income. You will even have to declare it if tax has already been taken out from the country which you earned it.
You may be exempt from paying tax on your foreign employment if you work for the defence or police force, or an organisation engaged in overseas aid work. However, you are still required to submit a tax return and report the exempt income.
If you are paying foreign tax on your overseas income, add the foreign tax back to your net employment income. This will determine the assessable amount. Include this amount as “assessable foreign income.” When doing your tax, make sure you convert all amounts into Australian dollars. If not, you could end up declaring your income incorrectly which could result in you paying the wrong amount of tax.
If you’re not sure whether or not you’re completing your tax return correctly while living overseas, it’s always best to consult with a tax agency. Agents will help you correctly complete your tax return and avoid any costly mistakes.
If you are an Australian travelling to reside overseas, the tax-free threshold changes. You will be entitled to a threshold amount of $13,464, plus ($4,736 divided by 12, multiplied by the number of months you were an Australian resident for tax purposes, counting the month you left). In other words, you don’t have to worry about filling out a tax return until your earnings are over the tax-free threshold. It is important to note that this tax free threshold can only be claimed while you are an Australian resident.
If you own a house and are heading overseas, it can seem appealing to rent it out. After all, the house will still be there, often fully furnished, but completely empty. Why not make some extra income by renting your house while you’re living overseas?
If you decide to rent your house, you need to be aware of the appropriate tax implications. If you temporarily rent out your house, it will still be considered your main residence for up to six years for capital gains purposes. If you don’t rent out your house, it can continue to be treated as your main residence for an unlimited amount of time after you vacate and move overseas.
When filling out your tax return, you will need to declare your Australian house as your main residence, and are unable to declare another property as your main residence. However, if you cease to be an Australian resident while overseas, you may become liable to pay capital gains tax.
Higher Education and Trade Support Loans
Have you studied at university and accrued a Higher Education Loan Programme (HELP) or Trade Support Loan (TSL) debt? Make sure you are aware of the current rules, as the Australian Government has recently made changes to debt repayments for those who have moved overseas.
Previously, graduates were able to move overseas and not have to worry about HECS repayments until they returned to Australia and earned above the repayment threshold.
However, the Australian Government has recently changed the rules regarding HECS repayments. As of 1 January 2016, if you are living overseas for more than six months in any 12 month period, you will be required to repay your debt as you would if you were living in Australia.
As of 1 July 2017, if you are living overseas and earning an income that exceeds the minimum repayment threshold, you will have to make compulsory repayments.
It is important to ensure you are aware of the current rules regarding HECS repayments before you move overseas to avoid having a nasty debt.
If you are an Australian resident living abroad, then you will still be liable to pay the medicare levy on your tax. If your income exceeds $90,000, you will be liable for the medicare levy surcharge.
If you are no longer an Australian resident while you are overseas, you will no longer have to pay the medicare levy. In your tax return, you can claim the number of days you haven’t been a resident as exempt days.
Even if you are planning to leave Australia permanently, the same rules still apply to superannuation. You will not be able to access your superannuation until you reach a certain age, retire or satisfy a condition of release.
It is important to make a note of these simple tips before you head off overseas to avoid any tax troubles when you return to Australia.
What recommendations can we make to those moving overseas?
- Make sure you know or have access to important details such as your tax file number. If necessary, take the original documents with you when you relocate overseas.
- Know if you are going to be earning over the tax-free threshold when working overseas. If you haven’t obtained a job before you leave, make sure you are aware of the tax-free threshold in case your earning exceed this amount.
- Change your contact details and address so the Australian Government and Australian Taxation Office know you are moving overseas.
- To avoid having a debt to repay in Australia, don’t forget to pay your tax every year and any HECS payments once you have moved overseas.