Leaving Australia to work overseas – Watch your tax residency

An increasing number of Australians are deciding to spend a period of time living and working overseas – often in a low tax or no tax location.

However, if you don’t cease to be a tax resident of Australia you may find yourself with an unwanted and avoidable tax bill.

Here’s why.

  • Individuals who are tax residents of Australia are usually taxable in Australia on their worldwide income – whether or not they bring the income back to Australia.
  • By contrast, a person who is not tax resident in Australia is only subject to Australian income tax on income that has an Australian source – usually only rental income.   Note: Bank interest, dividend income, and royalty income is usually not subject to additional tax when received by non-Australian residents, so long as the correct amount of withholding tax has been applied.

This means that if you remain a tax resident of Australia and receive income from an employment in a no tax/low tax jurisdiction you can expect to receive an unwelcome – and possibly avoidable – tax bill from the Australian Taxation Office.

A full understanding of what you need to do to become non resident for Australian tax purposes is therefore key to ensuring you keep as much of your expat salary as possible.

Issues to be considered here are your domicile status for tax purposes, whether you have established a “permanent place of abode” outside Australia, and provisions of any applicable Tax Treaty between Australia and the country in which you will be living and working.

GM Tax advises many individuals who are departing Australia to live and work overseas, with particular reference to their residency status.  Taking such advice at an early stage is good planning – you can’t plan after the event!

Complete the enquiry form on this page if you are an Australian who is planning to spend a period of time living and working overseas – we’ll be pleased to have an initial discussion with you about your situation and how we might help.