General Info on Australian Tax Residency

[Guest Liam]

Australian tax residents are liable to tax on their world-wide income. It is therefore important to confirm your correct residency status.

 

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 qualify as an 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 38.5% 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 may also be eroded by UK salary income, so residency may affect the tax-efficiency of your Australian investment property.

 

Residency is defined in section 6(1) of ITAA 1936 and the rules are summarised:

 

So far

as an individual is concerned, these terms are defined to mean:

 

"(a) a person, other than a company, who resides in Australia and includes a person-

 

(i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia;

 

 

(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or

 

(iii) who is an eligible employee for the purposes of the Superannuation Act 1976 or is the spouse or a child under 16 years of age of such a person; "

 

3. The above definition, in effect, provides four tests to

ascertain whether an individual is a resident:

. residence according to ordinary concepts;

. the domicile and permanent place of abode test;

. the 183 day test; or

 

 

. the Commonwealth superannuation fund test.

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.

 

Hope this is of help

 

 

Liam