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Proposed Taxation Changes to Residency Rules

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Proposed Taxation Changes to Residency Rules

Old 12th Aug 2021, 06:04
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Proposed Taxation Changes to Residency Rules

HI folks,
Wish I'd posted this earlier but today is the last opportunity to sign the petition to parliament to reconsider proposed residency rule changes which will have a significant impact on Aussies abroad.

I'm unable to post a URL with a new account (perhaps someone else can?) but it can be found by searching "Petition EN2834 - Proposed Taxation Changes to Residency Rules"

Parliament of Australia Petition EN2834 – Proposed Taxation Changes to Residency Rules - The Australian-Thai Chamber of Commerce (AustCham) (austchamthailand.com)
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Old 12th Aug 2021, 19:50
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I just want internal borders to open so I can start paying tax again. I guess we all have our priorities.
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Old 12th Aug 2021, 21:55
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I lived abroad as a non-resident airline pilot for almost 20 years. Not once was I home for 45 days despite having 10 weeks of annual leave. Having significant economic interests in Australia, some aspects of this new rule welcomed. That is, a clear-cut time definition to determine residency.

However, I can see if you have left your family in Australia and commute, or work for an airline that is FIFO for your monthly days off, it would be crippling. Take for instance the CX pilot thread starter ( I'm assuming ). His package has been slashed 60% + and to pay Australian tax whilst trying to commute is surely not worth it? The professional stress of the job and stress on your family as well as health. Not ideal.

These laws probably won't catch out who they need to. High net worth, dual residents, setting families up in Australia whilst not contributing tax wise due their non-residency status. Yet, it will provide a glut of highly experienced airline pilots moving forward when coupled with the dramas of COVID.
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Old 12th Aug 2021, 23:14
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In the last 15 years, I have spent less than 3 weeks a year in Australia. When I retire, I want to spend a few months a year there and the rest in SE Asia. When I stop working I’ll sit down with my accountant and work out if the benefits of residence, such as Medicare and tax free income threshold, outweigh the downside of being tax resident, and plan accordingly.

Back in the 1990s CX pilots were able to get away with it as they started working full time in HKG and quietly moved back to Australia when a base became available. A foreign address and under 6 months at home meant they didn’t flag up to the ATO. QF long haul pilots then wanted they same treatment as they were out of the country for over 6 months as well. The ATO caught on and computer matching of immigration data came in together with additional criteria to define residency, such as having a home available, a car, family living full time etc.
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Old 12th Aug 2021, 23:29
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such as Medicare
Consider that one seriously, without Medicare a simple visit to the doctor will cost you an arm, and not covered by private insurance. Simple vaccinations like a tetanus shot will cost $500 after being bitten by a dog or stepped on a nail, and again not covered by insurance generally. Most local insurance has exceptions for stuff covered by Medicare. PBS and medications is another part that requires a Medicare card to access. Being over 40 without Medicare and you walk a minefield of very large costs.
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Old 13th Aug 2021, 01:11
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Originally Posted by Gnadenburg View Post
I lived abroad as a non-resident airline pilot for almost 20 years. Not once was I home for 45 days despite having 10 weeks of annual leave. Having significant economic interests in Australia, some aspects of this new rule welcomed. That is, a clear-cut time definition to determine residency.

However, I can see if you have left your family in Australia and commute, or work for an airline that is FIFO for your monthly days off, it would be crippling. Take for instance the CX pilot thread starter ( I'm assuming ). His package has been slashed 60% + and to pay Australian tax whilst trying to commute is surely not worth it? The professional stress of the job and stress on your family as well as health. Not ideal.

These laws probably won't catch out who they need to. High net worth, dual residents, setting families up in Australia whilst not contributing tax wise due their non-residency status. Yet, it will provide a glut of highly experienced airline pilots moving forward when coupled with the dramas of COVID.
Yes, paying Aus tax would be unsustainable when combined with cost of living for many expats. Whilst I agree there are some who probably should be paying their fair share of tax back home, I'm more concerned by how restrictive the proposed limits would be for someone with very little economic interest in Aus but a genuine reason for visiting for frequently eg elderly/sick parents.

Originally Posted by SHVC View Post
I just want internal borders to open so I can start paying tax again. I guess we all have our priorities.
Absolutely. Understand this is not a pressing issue for most
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Old 13th Aug 2021, 01:33
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Originally Posted by krismiler View Post
In the last 15 years, I have spent less than 3 weeks a year in Australia. When I retire, I want to spend a few months a year there and the rest in SE Asia. When I stop working I’ll sit down with my accountant and work out if the benefits of residence, such as Medicare and tax free income threshold, outweigh the downside of being tax resident, and plan accordingly.
If you are an expatriate and don't have comprehensive private health coverage you're a mug. In my time abroad, I went to a number of fundraisers for airline pilots, who had not insured themselves properly. They and their families sent to ruin by medical bills. Medicare doesn't come into it!

I think some of the changes coming into effect are for folks with retirement aspirations like yourself. Like the opening poster here, there will be little sympathy from Australian resident taxpayers. Residency status has been abused over the years and unfortunately, some undeserving pilots ( and other expats ) are going to pay an unfair price.
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Old 13th Aug 2021, 04:39
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swh

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Originally Posted by Gnadenburg View Post
I lived abroad as a non-resident airline pilot for almost 20 years. Not once was I home for 45 days despite having 10 weeks of annual leave.
The 45 days includes time at the behest of your employer. There will be pilots (and many other expats) who will trigger 45 days during their normal duties. A day is defined as a calendar day or part thereof. Arrive at 10 pm, have 27 hrs rest and depart 1 am, that is 3 days.

They have it at 6 weeks now, then another budget they will change it to 4 weeks, then 2 weeks, then zero.

However they have no interest in providing any services for the tax paid. No income tax will be paid by those who live somewhere with a double tax treaty with Australia.

If anyone has financial interests in Australia they are already being taxed on those interests at the same rate or higher than a resident.
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Old 13th Aug 2021, 07:46
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Fortunately I have permanent residence and top rate health insurance in the country I'm in. When I hit 65, spending the winter months in QLD would be quite appealing. My investment properties which are currently negatively geared, should be paid off by then and resident tax rates on the income would be better then the 33% from the first dollar paid by non residents. Medicare would be good too as private insurance starts going upon steeply at that age. A seniors card also has a few nice benefits.

A few months away in SE Asia on the beach enjoying a low cost of living will fill out the remainder of the year.

When the time comes, I'll sit down with the accountant and work out whats best for me under the prevailing laws at the time.
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Old 13th Aug 2021, 23:40
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Originally Posted by swh View Post
The 45 days includes time at the behest of your employer. There will be pilots (and many other expats) who will trigger 45 days during their normal duties. A day is defined as a calendar day or part thereof. Arrive at 10 pm, have 27 hrs rest and depart 1 am, that is 3 days.
I haven't read anything suggesting if you come to Australia on a General Declaration, this will count toward your 183 days, or 45 days on further scrutiny? That's ragged and unfair for aircrew.

I received my movement records from Home Affairs Dept and there is no record of my departures nor arrivals as a crew member on international flights. Anecdotally, form a high-net worth Australian tax specialist, I'm pretty sure these are the records the Tax Dept accesses.

As should be telling from the lack of interest in this thread, it should be apparent nobody gives a rats a$$ about expatriate pilots and taxation. Judging by the lack of empathy of many Australians at the stress of repatriating as a redundant Cathay Group pilot, I'd suggest be prepared for a very strange and selfish country on return. It's insular and shallow, at the same time selfish and spoilt. I'd be on a plane out of here but these tax laws will make it cheaper to actually retire here, rather than live abroad on the contracts on offer!

Originally Posted by krismiler View Post
When the time comes, I'll sit down with the accountant and work out whats best for me under the prevailing laws at the time.
Yep, the prevailing laws at the time! Ain't that the truth. Very hard to plan a retirement strategically, with government often moving the goalposts. Property was even better years ago. That said, by late 2020, many saw their personal wealth dramatically increase, despite job loss thanks to stimulus and a low interest rate environment. It's bizarre. Now, many Australians seem to think our economy bullet proof. It's concerning, political leadership is becoming bi-partisan in its fiscal irresponsibility, with elections looming. A curse of modern democracy.

Personally, I went down the road of property and maximum Australian super to facilitate retirement. Property yields are low and CGT liability high. However, it seems a powerful protection against inflation.
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Old 14th Aug 2021, 13:02
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Originally Posted by Gnadenburg View Post
I haven't read anything suggesting if you come to Australia on a General Declaration, this will count toward your 183 days, or 45 days on further scrutiny? That's ragged and unfair for aircrew..
From the Australian Chamber of Commerce Hong Kong https://www.austcham.com.hk/advocacy/15

ĒThe proposed rules will involve a two-step approach to determining tax residency.

The 183-day test

The rules outlined in the budget begin with a primary test of 183 days. If a person is physically present in Australia for more than 183 days in a year, then they are an Australian tax resident. Days in Australia will include travel for business and leisure purposes.

If they are in Australia for less than 183 days, then a secondary test will be applied to determine residency Ė this is referred to as the 45-day test.

The 45-day test

If a person spends more than 45 days in Australia, an evaluation of four factors will then determine if that person will be tax resident. If the person satisfies any two of the four factors outlined below, subject to any double tax agreement that may be in force, they will be considered a tax resident of Australia and subject to tax in Australia on world-wide income.

The four factors are:
  1. Right to reside permanently in Australia: e.g. an Australian Citizen or a permanent resident
  2. Australian Accommodation: e.g. retaining a property which you keep for your use
  3. Australian Family: having immediate family members (spouse and/or children under the age of 18) living in Australia
  4. Australian Economic Interests: e.g. having Australian assets such as property or other economic interests in AustraliaĒ
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Old 14th Aug 2021, 13:25
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Basically if you truly live abroad and donít have one foot dipped in the pond in australia then really nothing changes.

Donít see what the big deal is.
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Old 14th Aug 2021, 19:49
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The system is fair.

Iíve been an expat for years.

If you want the benefits of Australian ie Medicare, kids schooling, use of public roads etc then you have to contribute.

Every expat I know has the intention to retire in Oz. Iím paying tax overseas & in Australia but I use both systems

Kiwis have a donít pay tax on foreign income..
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Old 14th Aug 2021, 22:24
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Originally Posted by swh View Post
From the Australian Chamber of Commerce Hong Kong https://www.austcham.com.hk/advocacy/15

ĒThe proposed rules will involve a two-step approach to determining tax residency.

If a person is physically present in Australia for more than 183 days in a year, then they are an Australian tax resident. Days in Australia will include travel for business and leisure purposes.

If they are in Australia for less than 183 days, then a secondary test will be applied to determine residency Ė this is referred to as the 45-day test.
You know full well your colleagues would have tested this clause in contemporary circumstances. Many commuters I know, get very close to to the current six month rule, never including their travels to Australia on a Gen Dec.

You can for free, have access to your international movements ex-Australia. They do not show up on mine. However, my international flying ex-Australia a little different in scenario to a three day CX layover.

I disagree with some of the above posts. I think the proposals a little extreme in the net it casts. Probably too, avoiding catching the abuse of many dual citizens.

Commuting will be different for many Australian airline pilots under the proposed changes. As will the attractiveness of a number of contracts when they return post-COVID.
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Old 14th Aug 2021, 22:52
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Hopefully Australia won't adopt the US system of income tax based on citizenship, with US passport holders being liable for tax on their earnings even if they haven't set foot on home soil for 20 years.

Unfortunately, the Aussie expat is a lucrative targeted for the ATO, as due to the distance and cost of commuting, Australians doing this need to be earning very good money to make it worthwhile. Some countries are a source of cheap labor and a lot of effort is involved in for example, going after thousands of construction labourers for a very small return from each one, whereas an Aussie working in Hong Kong or the Middle East and coming home regularly, would be on a very attractive package. Low hanging fruit for the ATO.
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Old 15th Aug 2021, 02:04
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Originally Posted by Gnadenburg View Post
You know full well your colleagues would have tested this clause in contemporary circumstances. Many commuters I know, get very close to to the current six month rule, never including their travels to Australia on a Gen Dec.
I would disagree, I know of some the ATO have taken all days in Australia regardless how they entered. Most crew with electronic passports enter Australia through the automatic gates. Which ATO rules mentions a general declaration and tax residency ? The paper which started this off "Review of the Income Tax Residency Rules for Individuals" highlighted that there was no integration between immigration and the ATO, it was looking at cases of 457 visas, investment visas, working holidays etc.

As the Australian Chamber of Commerce Hong Kong states the new test are a catch any travel for business or pleasure.

Likewise being employed permanently overseas, and having your permanent home overseas, and being absent from your permanent home to visit Australia was not cause for change in your residency status, the ATO previously tried, the court did not agree see https://iknow.cch.com.au/document/at...ding-v-fc-of-t

Originally Posted by Gnadenburg View Post
They do not show up on mine. However, my international flying ex-Australia a little different in scenario to a three day CX layover.
Its going to hurt the middle east carriers more when as they transit through to/from NZ, and it will hurt many pilots from the pacific rim that have Australia as their main destination.


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Old 15th Aug 2021, 08:41
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Originally Posted by krismiler View Post
Hopefully Australia won't adopt the US system of income tax based on citizenship, with US passport holders being liable for tax on their earnings even if they haven't set foot on home soil for 20 years.
Seems like this is a roundabout way of doing it, most expats pre covid would fail the new test. Reality is it would have huge support at home. Hitting tax dodging expats is money for jam.

Iíve never met an expat who doesnít relentlessly complain about taxes. Maybe some will just drop the passport.
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Old 15th Aug 2021, 22:31
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Originally Posted by swh View Post
I would disagree, I know of some the ATO have taken all days in Australia regardless how they entered.
As the Australian Chamber of Commerce Hong Kong states the new test are a catch any travel for business or pleasure.

Its going to hurt the middle east carriers more when as they transit through to/from NZ, and it will hurt many pilots from the pacific rim that have Australia as their main destination.
I doubt it and it would be unfair if days in Australia included crew duties. However, being in Australia, claiming to be on business, has been a common non-residency rort. In conversations with Australian tax specialists based abroad and high net worth individuals who move off shore to avoid business and personal tax, Australian pilots are a ways down the list in some of the lucrative loopholes the ATO would be looking to tighten. I guess we'll both wait and see for a definitive answer from the ATO.

I would have thought it affecting your colleagues the most? The Hong Kong packages have become unsustainable for many with families so they will look to onshore. Eventually, if the ability to commute returns, the 45 day rule will be a problem.


Originally Posted by patty50 View Post
I’ve never met an expat who doesn’t relentlessly complain about taxes. Maybe some will just drop the passport.
Most of my expat colleagues in aviation went abroad for opportunity after losing their jobs at home in Australia. After seeing the hand-out or I'm alright Jack attitude of many resident Australians now, they would seem a cut above the average back home.

Personally, I've always swam with Australian taxation. My legitimate complaint is that Government moves the goalposts too often, making it difficult to plan a self-funded retirement. This will continue to happen, as Australia's balance sheet is now vulnerable to inevitable economic, geo-political or climate shocks due the cost of the COVID response. But hey, if you are witness to other threads on COVID here, it's only money ( other people's of course )

Last edited by Gnadenburg; 15th Aug 2021 at 22:51.
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Old 16th Aug 2021, 00:01
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Cheer up, Parliament will roll out yet another budget repair levy shortly on top of the Medicare levy.
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Old 16th Aug 2021, 01:44
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Cheer up, Parliament will roll out yet another budget repair levy shortly on top of the Medicare levy.
Neither of which expats will pay. I agree that constant rule changing is unfair, however the whole attitude of cleaning up overseas then retiring in Australia and milking medicare for all its worth is a joke. Meanwhile the higher earning residents keep on ponying up to fund the whole thing.
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