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Australian Tax Residency
Australian tax residents are liable to tax on their world-wide income. It is therefore important to confirm your correct residency status while you are working abroad so that you do not face tax back home.
While the UK-Australia Double Tax Treaty aims to eliminate double tax, there are a wide range of situations that will cause increased tax should you be considered dual resident of the UK and Australia.
For example, dividends earned in the UK would be taxable in Australia if you are still Australian tax resident. You may not have paid tax on these dividends in the UK (i.e. if you are under the Higher Rate tax threshold), so there will be only a 10% tax credit to claim on your Australian Tax Return against tax on these dividends. A balance of up to 38% more tax may be due on these dividends, after they are converted to dollars!
To review Australian Tax Office Rules on UK Dividends Click here
Any negative gearing losses in Australia will also be eroded by UK salary income, so residency will affect the tax-efficiency of your investment property.
Residency is defined in section 6(1) of ITAA 1936 and the rules are summarised in IT2650.
The main test is as follows: Did you leave Australia with the intention of establishing a permanent home abroad, for more than two years, and can you prove that intention?
If you have not completed the Residency section of your Australian Tax Return correctly, or taken the appropriate steps to finalise your affairs back home, you may still owe tax in Australia on UK income.
For more information please go to www.ato.gov.au or contact one of our advisors.
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Dynamic Management Solutions Limited is a company registered in England and Wales with company number 3652783
and whose business address and registered office is 3rd Floor, 3 Copthall Ave, London, EC2R 7BH |
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