Tax and offshore work

[Ignatius]

I'm looking at taking a fifo job overseas, so wondering how tax works, especially if your out of the country for in excess of 183 days?

[havick]

If you're not paying any tax in the country that you're earning the money then the ATO will expect you to pay the same amount of tax as if you earned all the money here in Australia (ie, put money aside for your tax bill at the end of the year).

If you pay tax in the country where you are earning the money then you should get a statement from your employer stating how much tax you have paid overseas. The ATO will expect you to pay the difference that you would have normally paid in Australia to what you have paid overseas. (I'm currently in this boat flying in the Solomon islands - equal time FIFO).

The 183 day rule no longer exists (thanks Rudd and Labour). You either have to move out of Australia all together and reside somewhere else (no longer be a resident of Australia for tax purposes), but if you are coming back to Australia that will be difficult to prove.

If you are earning money in a tax free country the ATO will come after you for their chunk of change.

There's not many scenarios where you can earn tax free money overseas these days, one example is if you're working as part of a recognised force (eg contractor in afghanistan or timor etc) and not have to give the ATO a cent.

Speak to an accountant, but the days of working for more than 183 days out of the country and banking the whole amount are long gone.

[KRviator]

Depending on your roster, the argument could probably be made that your primary place of residence - that is the place you spend the most nights - isn't Australia, so you aren't consider a resident for tax purposes, depending on things like associations, club memberships, family and the like.

If you own your own home in Australia, you're probably going to be SOL, but the tax office has a nifty calculator (http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=Resident.XR4&go=ok) that lets you plug in your situation to see their take on your situation.

Bear in mind if you earn any income from an Australian source while you're FIFO-ing out of Australia, you'll need to lodge a tax return, and you could be taxed as a foreign resident, without the 18,000 tax free threshold.

[havick]

Depending on your roster, the argument could probably be made that your primary place of residence - that is the place you spend the most nights - isn't Australia, so you aren't consider a resident for tax purposes, depending on things like associations, club memberships, family and the like.

Good luck, the tax office will come knocking if you try that one on.

[Move On]

It's now a minimum of 2 years full time out of Oz before you can claim you are no longer a resident before the ATO stops taxing you.

If you are married with children, all of you have to be out of the country for 2 years minimum.

So the first 2 years you will be paying the Ozzy tax rate, on the 3rd you will adopt the current countries tax rate 15% etc. This is a general example, it is a little bit more complex than this...Best advice...see your accountant, not Ppr*ne.

[TSRABECOMING]

If during a period (say 3 year) I also have income from a tenant renting my house. Do I need to pay this tax while I am still overseas?

[404 Titan]

Move On
It's now a minimum of 2 years full time out of Oz before you can claim you are no longer a resident before the ATO stops taxing you.

If you are married with children, all of you have to be out of the country for 2 years minimum.

So the first 2 years you will be paying the Ozzy tax rate, on the 3rd you will adopt the current countries tax rate 15% etc.
That is incorrect. Generally the ATO will accept your application for non-residency for tax purposes if you “intend” to live out of Australia for an extended period of time, generally two years. If you meet the non-residency requirements you are a non-resident from day one and pay no Australian tax.

Where people fall foul of the ATO is in situations where they are on secondment overseas for a fixed period of time with the intention of returning to Australia on a particular date or they keep their family in Australia.

Contrary to popular belief expats can also own property in Australia and still be a non-resident for tax purposes as long as they don’t use it as their primary place of abode. Keeping it as an investment property or a holiday house is perfectly acceptable with the ATO.

[By George]

404 Titan is the first correct reply I've seen. Seek advice or ring them direct for a ruling. When you come home it's a real laugh getting your Medicare card back. The Aviation ASIC took 3 months. Come home via Ashmore Reef, it's a walk in the park.

[404 Titan]

havick
If you're not paying any tax in the country that you're earning the money then the ATO will expect you to pay the same amount of tax as if you earned all the money here in Australia
Also incorrect. The ATO are only interested in overseas tax payments for tax offsetting purposes ie double taxation. There are many Australians living and working in Dubai who are legally non-residents of Australia for tax purposes but pay no income tax in the UAE either because there isn’t any income tax in the UAE.

TSRABECOMING
If during a period (say 3 year) I also have income from a tenant renting my house. Do I need to pay this tax while I am still overseas?
In a nut shell, yes, and if you are a non-resident of Australia for tax purposes, at the non-resident tax rate ie higher. I would be careful saying you will be living and working for three years overseas though as in the eyes of the ATO it shows “intent” to return to Australia and you could be deemed a resident of Australia for tax purposes.

[havick]

404Titan. I am correct in what I say in the context in which I said it.

The guy asked about his situation (FIFO). In this case he WILL be a resident of Australia for tax purposes. In this situation if you are paying tax in the country which you are working (PNG, Solomon Islands as just two examples), then the ATO will offset that amount paid against what you owe them.

If you live in Dubai and are not a resident of Australia for tax purposes then the ATO has no involvement.

But FIFO worker is most definately considered a resident of Australia for tax purposes.

Don't take my comments out of context.

404Titan, you are correct in what you say, but not if the you are FIFO overseas but living in Australia.

[volare_737]

All makes sense. Just a general question. If you work overseas, but pay tax in australia, are there any cost one can offset ?

[havick]

If you work overseas but pay tax in Australia you can claim all the same deductions you would have if you were living in Australia (within reason), eg investment properties, work related deductions etc etc..

Where it becomes annoying is if you pay part of your tax elsewhere, and the rest in Australia then you have a smaller bucket of (Australian Tax paid) money to claim deductions out of.

[404 Titan]

havick

Sorry if I misinterpreted what you were trying to say. The way you worded it though made it appear paying tax overseas makes a difference to the ATO regarding residency status for tax purposes, in this case FIFO. All I was trying to say is that it’s irrelevant. FIFO you will almost certainly be classed as a resident of Australia for taxation purposes. If the other country though has a tax treaty with Australia then any foreign tax paid should be offset against any Australian tax liability.

[LeadSled]

Folks,
Pay for very competent expert accounting and legal advice for this situation, it is too important not to, and the answer may very well tell you whether you can afford to take the job.
Tootle pip!!

[AirTrafficOne]

Sadly, I used to work as an investigator for the ATO - I know, I know, enough of the rock throwing already.

1.Get competent legal and accounting advice - IN WRITING from the Firm, outlining your complete situation and their advice, without disclaimers on their part, so you can sue them later if they get it wrong. Your local accountant will have NO IDEA so stick with someone who KNOWS and is up to date with international taxation law.

2.Write to the ATO yourself, setting out EXACTLY your plans and ask for a RULING on your set of circumstances. If you get a favourable decision from the ATO and you do NOT waiver from the basis on which that decision was made, you'll be OK and protected. NEVER lose that copy of the Ruling by the way!

Hope this helps...

[LeadSled]

Folks,
Absolutely correct advice from AirTrafficOne, this is an area where getting it wrong can be horrendously expensive.

A late good friend of mine was bankrupted by the ATO, because he did not order his affairs to best advantage, and the back tax and penalties were a personal disaster.

I have close relatives who are accounting professionals with extensive experience in the area ---- and having been an expat, at a time of upheavals in the Australian tax treatment of expat "residents for tax purposes" ---- I have some personal experience ---- pay for the best advice available, it will be a cheap investment in the long run, so that you can enjoy your expat experience without any nagging qualms about what happens when you get back to AU.

Tootle pip!!