Expats watch out!
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Expats watch out!
Probably nothing new here, but this is from Noel Wittaker's latest newsletter (dated today):
Expats Watch Out!
The ATO certainly has Australian Residents working overseas in their sights and they are winning a lot of cases lately. Even if you have not lived in Australia for years, if you have a home here they will want to tax your overseas income. If your spouse and children live here while you work overseas you have no chance at all. You will be considered a resident of Australia for tax purposes so the wages you earn overseas will be taxed by Australia, even though they are probably also taxed overseas. The only concession is that the ATO will give you a tax credit for the tax you paid overseas, if you can prove it, but you will not be entitled to a refund of any overseas tax.
The latest case is Pillay v FCT 2013 AATA 447, where Dr Pillay had lived and worked in East Timor since 2006. The AAT found that he still had a continuity of association with Australia because he maintained a house here and had an Australia bank account. This was enough to prove he “resided” here so all the income he had earned while living overseas was taxable in Australia.
Expats Watch Out!
The ATO certainly has Australian Residents working overseas in their sights and they are winning a lot of cases lately. Even if you have not lived in Australia for years, if you have a home here they will want to tax your overseas income. If your spouse and children live here while you work overseas you have no chance at all. You will be considered a resident of Australia for tax purposes so the wages you earn overseas will be taxed by Australia, even though they are probably also taxed overseas. The only concession is that the ATO will give you a tax credit for the tax you paid overseas, if you can prove it, but you will not be entitled to a refund of any overseas tax.
The latest case is Pillay v FCT 2013 AATA 447, where Dr Pillay had lived and worked in East Timor since 2006. The AAT found that he still had a continuity of association with Australia because he maintained a house here and had an Australia bank account. This was enough to prove he “resided” here so all the income he had earned while living overseas was taxable in Australia.
China Flyer
Looking a little deeper into the AAT case I get the impression that their decision was based on Dr Pillay's confusing residential status. He worked in Dilli where he paid his income tax but really lived in Bali with his wife where he had a long term lease on a property. His accommodation in Dilli was provided by his employer. He and his wife also owned a property in Coffs Harbor which was mostly vacant during the year except for about 6-8 weeks when they used it for holidays.
At the end of the day I think Dr Pillay will win this decision on appeal but the trend of the ATO pursuing such cases is disturbing.
Looking a little deeper into the AAT case I get the impression that their decision was based on Dr Pillay's confusing residential status. He worked in Dilli where he paid his income tax but really lived in Bali with his wife where he had a long term lease on a property. His accommodation in Dilli was provided by his employer. He and his wife also owned a property in Coffs Harbor which was mostly vacant during the year except for about 6-8 weeks when they used it for holidays.
At the end of the day I think Dr Pillay will win this decision on appeal but the trend of the ATO pursuing such cases is disturbing.
One of the tests used by the ATO to determine non-residency requires a permanent place of abode outside Australia. Permanent doesn't mean 'forever', but it does mean for the foreseeable future. Dr Pillay's living arrangements and intentions were wishy-washy at best. Given his on-going connection to Australia via the house he owned (and used as his 'family home') there, I think it was inevitable the ATO and the AAT would decide he is a resident for tax purposes.
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Medicare does not see it that way
I wanted a medicare number to travel back to Australia I still paid tax and medicare on Income in Australia and was told no?
The person I believe had given me the wrong advice because it was less than five years, but would make an interesting argument.
The person I believe had given me the wrong advice because it was less than five years, but would make an interesting argument.
The worst part is, yes they want you to pay tax as of you are a resident HOWEVER you are NOT entitled to such things as salary sacrificing into super, access to the Pharmaceutical Benefits Scheme etc on the basis that you are not paid in AUD$ in Australia. 
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Sounds like they are going the way of Canada where you cannot as a Canadian citizen own property or have a bank account in Canada if you don't want to pay tax there.
Of course you can own property in Canada - and have a bank account - and not pay income tax - as long it's not your primary residence.
Most of us have been assessed by the CRA as "non resident for tax purposes" - a comprehensive process, fairly painless provided you're above board.
Just don't try the "natural person" B-S!!
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Seems that serviced apartments or flat sharing doesn't cut it with the ATO - watch out boys and girls:
Several recent decisions by the Administrative Appeals Tribunal (AAT) have highlighted the common misconception that Australian citizens living and working overseas are not required to pay Australian tax on their income.
This misconception is a serious risk for taxpayers living and working in low tax jurisdictions, where the differences between the local income tax rates and Australian personal income tax rates are greatest.
Taxpayers and advisors need to be particularly careful as Australian Tax Office (ATO) audit activity has recently increased in this area. In addition to the underpaid tax, taxpayers may have to pay interest and penalties.
Boer v Commissioner of Taxation
The AAT confirmed that income received by Mr Boer from his employment in Oman was properly included in his Australian tax assessment for the 2009 income year.
Mr Boer, an Australian citizen, began working with a company in Oman in November 2008. As part of his work arrangement, he was required to work a 35 days on and 35 days off rotation. At the end of each rotation, Mr Boer departed from Oman and, on several occasions, returned to Australia to visit family and friends. While he was working in Oman, he lived in a single room apartment with an ensuite, bed, lounge area and a mini kitchen. However, he did not have exclusive possession of his accommodation as he shared it with another employee who worked a complementary roster.
The AAT held that Mr Boer was a resident of Australia for tax purposes because he had failed to establish a permanent place of abode outside of Australia.
Sully v Commissioner of Taxation
Similarly in this case, the AAT ruled that income received by Mr Sully from his employment as a marine engineer in Dubai was correctly included in his Australian tax assessment for the 2009 tax year.
Mr Sully, an Australian citizen, took up a position with a company in Dubai in April 2008. His employer provided him with accommodation where he shared a two bedroom apartment with another employee of the same company. Later, he was posted to work in New Orleans where he lived in an apartment. Mr Sully maintained family ties in Australia and owned a house in Cairns during the relevant period.
The AAT held that Mr Sully did not satisfy the ‘ordinary meaning of the word resides’ test as he only maintained residual connections with Australia. However, the AAT was not convinced that he had established a permanent place of abode in another country. Mr Sully was found to be a ‘citizen of the world’ who was prepared to go wherever his work took him. As such, because his domicile of origin was Australia, he was considered to be a resident for tax purposes.
Sneddon v Commissioner of Taxation
In this case the AAT held that Mr Sneddon was an Australian tax resident and the income he obtained from his employment in Qatar for the 2009 income year was properly included in his Australian tax assessment.
Mr Sneddon started working with a company in Qatar in April 2008. While in Qatar, he lived alone in a fully furnished apartment provided by his employer.
After considering eight relevant factors, the AAT concluded that Mr Sneddon was a resident of Australia under the ordinary meaning of the word ‘resides’. He maintained a ‘continuity of association’ with Australia despite his physical absence from Australia for a majority of the income year.
The AAT also noted in passing that Mr Sneddon did not satisfy the second test as he did not establish ‘a permanent place of abode’ in Qatar.
What it means for you and your clients
The ATO has a thorough audit program targeted at Australian citizens who live and work overseas (particularly in low tax jurisdictions). In our experience, there are two types of risk.
Several recent decisions by the Administrative Appeals Tribunal (AAT) have highlighted the common misconception that Australian citizens living and working overseas are not required to pay Australian tax on their income.
This misconception is a serious risk for taxpayers living and working in low tax jurisdictions, where the differences between the local income tax rates and Australian personal income tax rates are greatest.
Taxpayers and advisors need to be particularly careful as Australian Tax Office (ATO) audit activity has recently increased in this area. In addition to the underpaid tax, taxpayers may have to pay interest and penalties.
Boer v Commissioner of Taxation
The AAT confirmed that income received by Mr Boer from his employment in Oman was properly included in his Australian tax assessment for the 2009 income year.
Mr Boer, an Australian citizen, began working with a company in Oman in November 2008. As part of his work arrangement, he was required to work a 35 days on and 35 days off rotation. At the end of each rotation, Mr Boer departed from Oman and, on several occasions, returned to Australia to visit family and friends. While he was working in Oman, he lived in a single room apartment with an ensuite, bed, lounge area and a mini kitchen. However, he did not have exclusive possession of his accommodation as he shared it with another employee who worked a complementary roster.
The AAT held that Mr Boer was a resident of Australia for tax purposes because he had failed to establish a permanent place of abode outside of Australia.
Sully v Commissioner of Taxation
Similarly in this case, the AAT ruled that income received by Mr Sully from his employment as a marine engineer in Dubai was correctly included in his Australian tax assessment for the 2009 tax year.
Mr Sully, an Australian citizen, took up a position with a company in Dubai in April 2008. His employer provided him with accommodation where he shared a two bedroom apartment with another employee of the same company. Later, he was posted to work in New Orleans where he lived in an apartment. Mr Sully maintained family ties in Australia and owned a house in Cairns during the relevant period.
The AAT held that Mr Sully did not satisfy the ‘ordinary meaning of the word resides’ test as he only maintained residual connections with Australia. However, the AAT was not convinced that he had established a permanent place of abode in another country. Mr Sully was found to be a ‘citizen of the world’ who was prepared to go wherever his work took him. As such, because his domicile of origin was Australia, he was considered to be a resident for tax purposes.
Sneddon v Commissioner of Taxation
In this case the AAT held that Mr Sneddon was an Australian tax resident and the income he obtained from his employment in Qatar for the 2009 income year was properly included in his Australian tax assessment.
Mr Sneddon started working with a company in Qatar in April 2008. While in Qatar, he lived alone in a fully furnished apartment provided by his employer.
After considering eight relevant factors, the AAT concluded that Mr Sneddon was a resident of Australia under the ordinary meaning of the word ‘resides’. He maintained a ‘continuity of association’ with Australia despite his physical absence from Australia for a majority of the income year.
The AAT also noted in passing that Mr Sneddon did not satisfy the second test as he did not establish ‘a permanent place of abode’ in Qatar.
What it means for you and your clients
The ATO has a thorough audit program targeted at Australian citizens who live and work overseas (particularly in low tax jurisdictions). In our experience, there are two types of risk.
- In the first category are Australian citizens living and working overseas but continuing to be tax residents of Australia (often under the extended definition of ‘resident’). The risk for these taxpayers is they fail to declare foreign source income in their Australian tax returns, and the ATO raises assessments for underpaid tax, interest and penalties.
- The second category relates to Australians who are genuinely non-residents, but get caught up in ATO audits because they failed to take appropriate administrative steps (such as notifying government agencies and correctly completing immigration cards) to show they permanently left Australia and became non-residents.
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No to different from the hong kong Tax office wanting guys and gals who live in Australia, pay Hong kong tax even if they dont have a bank account, house , or even a work visa! If they can get there hands on your money especially the Labor Gov , they will.
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Canadian Tax Lawyers?
Would any of you happen to have worked with or know of a good tax firm/individual in Canada ("good" defined as being both knowledgeable/successful and reasonably priced)?
Specifically dealing with a long time offshore (15 years +) return to Canada with several of the smaller "ties" such as a bank account having been maintained.
Either a post or P.M. would be great.
Specifically dealing with a long time offshore (15 years +) return to Canada with several of the smaller "ties" such as a bank account having been maintained.
Either a post or P.M. would be great.
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1. The simple answer to this is pay tax, minimize your exposure, but pay some tax, I can tell from experience it keeps the tax man happy, and shows you are playing the game.
2. Engage the services of a decent accountant, its money well spent, I made a deal with my guy that if he saved me more than his fees I'd pay him 10% of what he saved...best money ever invested IMHO.
3. Don't try and get to clever..but simple things work, i.e. rent your house out, and pay tax on the income...theres nothing in the provisions that says you can't rent the place to a family member.
4. Get an offshore bank account, meaning not in Oz, NZ, UK or US, there are plenty of options available...but essentially make it more trouble than its worth for them to even begin to figure out the trail.
5. Use the offshore account/C Card to access funds when your home...again it leaves virtually no trail.
6. If you really want to be a bit devious, have all your offshore accounts, debit cards, C Cards etc under the umbrella of a business or corporation etc.
7. For those dedicated individuals, divorce the missus, arrive at a settlement with respect to the home and alimony, and then arrange "visitation" with the kids...again its sharp practice, but as far I've been made aware alimony is either tax deductable or at the very least attracts a much lower rate of taxation....just don't have the misses signed up on benefits
All advice given to me by my tax guy..all perfectly legal..and sensible
2. Engage the services of a decent accountant, its money well spent, I made a deal with my guy that if he saved me more than his fees I'd pay him 10% of what he saved...best money ever invested IMHO.
3. Don't try and get to clever..but simple things work, i.e. rent your house out, and pay tax on the income...theres nothing in the provisions that says you can't rent the place to a family member.
4. Get an offshore bank account, meaning not in Oz, NZ, UK or US, there are plenty of options available...but essentially make it more trouble than its worth for them to even begin to figure out the trail.
5. Use the offshore account/C Card to access funds when your home...again it leaves virtually no trail.
6. If you really want to be a bit devious, have all your offshore accounts, debit cards, C Cards etc under the umbrella of a business or corporation etc.
7. For those dedicated individuals, divorce the missus, arrive at a settlement with respect to the home and alimony, and then arrange "visitation" with the kids...again its sharp practice, but as far I've been made aware alimony is either tax deductable or at the very least attracts a much lower rate of taxation....just don't have the misses signed up on benefits
All advice given to me by my tax guy..all perfectly legal..and sensible
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haughtney1,
Sorry, but your CC better not have your name on it as all overseas CC transactions are reported by the banks for that reason.
I've had/getting advice (Aus) from a top tier international accounting firm (6k so far) and if you have family here while working in HK it's HIGHLY likely you're toast. I also took advice from a tax lawyer who said the same. Both stated the ATO is on the war path with regards to this. It also has considerably altered its position on what it determines for domicile.
If you're doing the asia shuttle, whether you maintain an abode away or not DO NOT rely on this site/your interpretation of what the ATO has on it's website or someones else's determination.
Spend the money and get TOP LEVEL advice for your circumstances, preferably before you get yourself into this situation as to structure it correctly, it's hard to alter to comply otherwise.
Other point, don't FCUKING brag to friends/family about your tax status, a number of people are audited on dob-ins!
By the way if your thinking they can only go back on me for X yrs, think again, the countdown starts from the date you lodged that yrs return, if you haven't due to your thinking I'm a non-resident so don't need to they can return to that tax yr anytime they like for consideration.
Sorry, but your CC better not have your name on it as all overseas CC transactions are reported by the banks for that reason.
I've had/getting advice (Aus) from a top tier international accounting firm (6k so far) and if you have family here while working in HK it's HIGHLY likely you're toast. I also took advice from a tax lawyer who said the same. Both stated the ATO is on the war path with regards to this. It also has considerably altered its position on what it determines for domicile.
If you're doing the asia shuttle, whether you maintain an abode away or not DO NOT rely on this site/your interpretation of what the ATO has on it's website or someones else's determination.
Spend the money and get TOP LEVEL advice for your circumstances, preferably before you get yourself into this situation as to structure it correctly, it's hard to alter to comply otherwise.
Other point, don't FCUKING brag to friends/family about your tax status, a number of people are audited on dob-ins!
By the way if your thinking they can only go back on me for X yrs, think again, the countdown starts from the date you lodged that yrs return, if you haven't due to your thinking I'm a non-resident so don't need to they can return to that tax yr anytime they like for consideration.
Last edited by ANCPER; 17th Aug 2013 at 10:18.
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Sorry, but your CC better not have your name on it as all overseas CC transactions are reported by the banks for that reason.
Both stated the ATO is on the war path with regards to this. It also has considerably altered its position on what it determines for domicile.
As I said (and I would assume your tax firm would be advising you similarly) the aim is not to evade tax, the aim is to avoid paying any more than necessary.
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Dune, sorry, no...but, I don't see why you need one. When you were a non-resident, you didn't owe taxes, and that's all there is to it. When you become a resident again, you start being liable for tax as of then. The "small ties" mean nothing: Everyone maintains small ties to their home country, as well as any country where they lived and/or worked. Again, the totality of all the small ties are intended to nail someone who is trying to use loopholes to pretend he isn't a resident. With a job, home, and dependents with you outside of CAN or AUS or wherever, it just doesn't matter how many ties you have, small or big: You factually are a non-resident.
I am sure you are familiar with this:
Residential Ties
Generally, secondary residential ties must be looked at collectively in order to evaluate the significance of any one such tie, therefore, it would be unusual for a single secondary residential tie with Canada to be sufficient in and by itself to lead to a determination that an individual is factually resident in Canada while abroad. Secondary residential ties that will be taken into account in determining the residence status of an individual while outside Canada are:
-personal property in Canada (such as furniture, clothing, automobiles and recreational vehicles),
-social ties with Canada (such as memberships in Canadian recreational and religious organizations),
-economic ties with Canada (such as employment with a Canadian employer and active involvement in a Canadian business, and Canadian bank accounts, retirement savings plans, credit cards, and securities accounts),
-landed immigrant status or appropriate work permits in Canada,
-hospitalization and medical insurance coverage from a province or territory of Canada,
-a driver's license from a province or territory of Canada,
-a vehicle registered in a province or territory of Canada,
-a seasonal dwelling place in Canada or a leased dwelling place,
-a Canadian passport, and
-membership in Canadian unions or professional organizations.
Other residential ties that the Courts have considered in determining the residence status of an individual while outside Canada, and which may be taken into account by the CRA, include the retention of a Canadian mailing address, post office box, or safety deposit box, personal stationery (including business cards) showing a Canadian address, telephone listings in Canada, and local (Canadian) newspaper and magazine subscriptions. These residential ties are generally of limited importance except when taken together with other residential ties.
Generally, secondary residential ties must be looked at collectively in order to evaluate the significance of any one such tie, therefore, it would be unusual for a single secondary residential tie with Canada to be sufficient in and by itself to lead to a determination that an individual is factually resident in Canada while abroad. Secondary residential ties that will be taken into account in determining the residence status of an individual while outside Canada are:
-personal property in Canada (such as furniture, clothing, automobiles and recreational vehicles),
-social ties with Canada (such as memberships in Canadian recreational and religious organizations),
-economic ties with Canada (such as employment with a Canadian employer and active involvement in a Canadian business, and Canadian bank accounts, retirement savings plans, credit cards, and securities accounts),
-landed immigrant status or appropriate work permits in Canada,
-hospitalization and medical insurance coverage from a province or territory of Canada,
-a driver's license from a province or territory of Canada,
-a vehicle registered in a province or territory of Canada,
-a seasonal dwelling place in Canada or a leased dwelling place,
-a Canadian passport, and
-membership in Canadian unions or professional organizations.
Other residential ties that the Courts have considered in determining the residence status of an individual while outside Canada, and which may be taken into account by the CRA, include the retention of a Canadian mailing address, post office box, or safety deposit box, personal stationery (including business cards) showing a Canadian address, telephone listings in Canada, and local (Canadian) newspaper and magazine subscriptions. These residential ties are generally of limited importance except when taken together with other residential ties.
So now I will have some pimple-faced, 25 year old government clerk determining based solely upon his/her OPINION whether the 2-3 secondary ties I have maintained (a passport, a bank account/credit card and a drivers license) subject me to back-taxes for almost 2 decades of being 100% offshore and not taking a dime from the Canadian government!
I am not saying I would have to pay back-tax as I am pretty sure anyone in a similar position would win on appeal in court. What I am saying is it costs Rev-Can (or whatever they call themselves these days) nothing to harass guys like us who make the move back and I would feel more comfortable having a "representative" with previous experience in similar cases in my corner in advance of my potential return ..... just in case.
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Any lawyer recommendations (especially tax ones) ....... back to square one LOL!
Thanks anyway Curtain, wish you had a tax law degree to back up your narrative; I'd be a client in a flash. Cheers.
Thanks anyway Curtain, wish you had a tax law degree to back up your narrative; I'd be a client in a flash. Cheers.
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Can-HK Tax Treaty
Dune,
The new HK-Canada tax treaty, which comes into effect 1st Jan 2014, will make determination of residency clear-cut. Even sensible. Under the treaty, it appears you can have a permanent home in both countries and still be non-resident for tax purposes. Here is the relevant section. Emphases are mine...
2.Where by reason of the provisions of paragraph 1 an individual is a resident of both Parties, then the individual’s status shall be determined as follows:
(a) the individual shall be deemed to be a resident only of the Party in which the individual has a permanent home available and, if the individual has a permanent home available in both Parties, the individual shall be deemed to be a resident only of the Party with which the individual’s personal and economic relations are closer (centre of vital interests);
(b) if the Party in which the individual’s centre of vital interests is situated cannot be determined, or if there is not a permanent home available to the individual in either Party, the individual shall be deemed to be a resident only of the Party in which the individual has an habitual abode;
(c) if the individual has an habitual abode in both Parties or in neither of them, the individual shall be deemed to be a resident only of the Party in which the individual has the right of abode (in the case of the Hong Kong Special Administrative Region) or of which the individual is a national (in the case of Canada);
(d) if the individual has the right of abode in the Hong Kong Special Administrative Region and is also a national of Canada, or if the individual does not have the right of abode in the Hong Kong Special Administrative Region and is not a national of Canada, the competent authorities of the Parties shall settle the question by mutual agreement.
The new HK-Canada tax treaty, which comes into effect 1st Jan 2014, will make determination of residency clear-cut. Even sensible. Under the treaty, it appears you can have a permanent home in both countries and still be non-resident for tax purposes. Here is the relevant section. Emphases are mine...
2.Where by reason of the provisions of paragraph 1 an individual is a resident of both Parties, then the individual’s status shall be determined as follows:
(a) the individual shall be deemed to be a resident only of the Party in which the individual has a permanent home available and, if the individual has a permanent home available in both Parties, the individual shall be deemed to be a resident only of the Party with which the individual’s personal and economic relations are closer (centre of vital interests);
(b) if the Party in which the individual’s centre of vital interests is situated cannot be determined, or if there is not a permanent home available to the individual in either Party, the individual shall be deemed to be a resident only of the Party in which the individual has an habitual abode;
(c) if the individual has an habitual abode in both Parties or in neither of them, the individual shall be deemed to be a resident only of the Party in which the individual has the right of abode (in the case of the Hong Kong Special Administrative Region) or of which the individual is a national (in the case of Canada);
(d) if the individual has the right of abode in the Hong Kong Special Administrative Region and is also a national of Canada, or if the individual does not have the right of abode in the Hong Kong Special Administrative Region and is not a national of Canada, the competent authorities of the Parties shall settle the question by mutual agreement.
Last edited by dhoonk; 20th Aug 2013 at 08:44.
I've had/getting advice (Aus) from a top tier international accounting firm (6k so far) and if you have family here while working in HK it's HIGHLY likely you're toast. I also took advice from a tax lawyer who said the same. Both stated the ATO is on the war path with regards to this.
