"Are you travelling overseas or permanently relocating?" Article by Tina Zawila

These days many young (and even older) Australians are taking the opportunity to travel and work overseas.  Usually when they are making the decision to embark on this adventure the last thing on their minds is tax!  However, it is important to consider your taxation obligations, and understand your tax position before you make the final decision on where to go and what to do.

An important consideration is whether you will remain an Australian resident for tax purposes, or establish a permanent place of abode overseas.  It's also important to know whether you will pay tax overseas on your foreign income.  
Broadly, Australian residents for tax purposes are taxed on their worldwide income, whereas non-residents are taxed on their Australian sourced income only.  Therefore, your residency status is critical in determining your taxation obligations.

The primary test for deciding an individual's residency status is where the taxpayer actually "resides", however, how does the ATO determine where someone resides?  The courts, when considering cases on this topic, refer to "continuity of association" and "establishing a domicile of choice elsewhere".  These are questions of fact based on each individual's circumstances. 

 

Where you have a spouse and/or children, your "continuity of association" will generally be where your family is.  Therefore it is nearly impossible for spouses to establish that they may have two separate countries of residence.

 

Your "permanent place of abode" is also a critical factor when determining residency.  Case law highlights that it is not enough to be outside Australia for a lengthy period (the ATO has used a rule of thumb of 2 years), but a taxpayer must also illustrate that they have established a permanent place of abode elsewhere (i.e. outside of Australia).  Generally speaking this means you have to stay in one location and establish a "home", as opposed to moving from one location to another, say every few weeks/months.

 

If you are considering working overseas, it is very important to seek advice and understand the taxation obligations of various scenarios, to avoid any unexpected taxation outcomes.  

 

Are you planning a trip overseas?

Have you recently returned to Australia after working overseas?
Do you need help determining your help tax obligations?

Call the taxation professionals at Sothertons on 4972 1300 to discuss your travel plans.