Tax resident questions and exemption to fly?

[Letsdoit]

 

I am British and have lived in Australia for the last 20 years.

 

I am thinking to go and live with my parents in the UK until the pandemic is over. At this stage I’m not sure if I want to make the move permanently however I’d say at least for the next two years while my little one is still so young. It could be that I want to stay there or possibly come back to Australia.

 

I have a couple of financial questions and tax residency questions - can anyone help?

 

• if I own a principal place of residence in Australia that would be positively geared if I rented it out. If I earn income in the UK does that automatically make me a resident of the UK for tax purposes? If I then wanted to sell the Australian property would I then lose any ‘principal place of residence’ tax concessions? Ie should I sell this property before going to the UK? Or can I say I’m on a holiday for the first couple of years? If I say I’m on a holiday does that mean I can’t work in the UK for that time? Or get a bank account, NHS etc?

 

• I also have some cash in my old business - if I want to pay it out as dividends while I’m away but somehow I’m a UK tax resident, what then? 

 

• Also does anyone know my chances of getting an exemption to fly if my intention is to go home for at least a year?

[Marisawright]

Whether you're a tax resident of the UK has nothing to do with whether you're working or not.   It's a question of where you are legally domiciled.  In general, if you're living in the UK for more than six months in the tax year, you're likely to be resident for tax purposes.  Of course, it's more complicated than that. 

While you are resident in the UK, you will still have to file an Australian tax return for any Australian income, and then also declare all your income (British and Australian) on your UK tax return.  It's a bit of a nightmare and you need a tax agent who understands both regimes to give you proper advice.  They're not easy to find. Try @Alan Collett

Edited August 15, 2020 by Marisawright

[Fisher1]

6 hours ago, Marisawright said:

Whether you're a tax resident of the UK has nothing to do with whether you're working or not.   It's a question of where you are legally domiciled.  In general, if you're living in the UK for more than six months in the tax year, you're likely to be resident for tax purposes.  Of course, it's more complicated than that. 

While you are resident in the UK, you will still have to file an Australian tax return for any Australian income, and then also declare all your income (British and Australian) on your UK tax return.  It's a bit of a nightmare and you need a tax agent who understands both regimes to give you proper advice.  They're not easy to find. Try @Alan Collett

If you return to live in the UK permenantly,  how long does the tax obligation last? I’m curious.

[Marisawright]

2 hours ago, Fisher1 said:

If you return to live in the UK permenantly,  how long does the tax obligation last? I’m curious.

You are always liable to pay tax on all of your worldwide income in your country of residence.   If you're receiving income in another county, then you also have to submit a tax return in that country, just for that local income, and they will tax you as a foreign investor. 

So, the only question to be asked is, which is your country of residence in that particular tax year?  

 

[Fisher1]

On 16/08/2020 at 08:00, Marisawright said:

You are always liable to pay tax on all of your worldwide income in your country of residence.   If you're receiving income in another county, then you also have to submit a tax return in that country, just for that local income, and they will tax you as a foreign investor. 

So, the only question to be asked is, which is your country of residence in that particular tax year?  

 

Sorry I wasn’t clear. I meant to say, how long do you have an obligation to Australia if you are permenantly back in the UK.

 

[Marisawright]

1 hour ago, Fisher1 said:

Sorry I wasn’t clear. I meant to say, how long do you have an obligation to Australia if you are permenantly back in the UK.

I don't understand the question.  What do you mean by an "obligation"? 

If you are permanently back in the UK and no longer have any Australian income, then you just submit a tax return for the last financial year you were resident in Australia, and that's that. 

[Fisher1]

That’s what I thought, I was just checking. Given  that the USA pursues people for tax even when they are living permanently elsewhere, It seemed a reasonable enough question to me. Sorry if that put you out.

[Marisawright]

4 hours ago, Fisher1 said:

That’s what I thought, I was just checking. Given  that the USA pursues people for tax even when they are living permanently elsewhere, It seemed a reasonable enough question to me. Sorry if that put you out.

It didn’t put me out, I just wasn’t sure what you meant. You are right, I’d forgotten that US citizens Have to pay tax in the US even if they don’t live there. I have read that it’s the only country with that rule

[rammygirl]

Living in the UK with Aus assets/income.  If your only Aus income is bank interest you do not need to do a ATO return BUT you must inform the bank and they will deduct a 10% withholding tax to the interest. You also declare this on your UK return and get a credit for any ATO tax paid.

Any other type of income like rentals etc will require you to make an ATO return and pay tax due to ATO (at a higher flat rate with no earning disregard), again you declare this on UK return and get a credit for tax already paid.

We have done this and now in Aus and still have to do.a UK return we use an accountancy practise that can do both sets of returns.

[Marisawright]

1 hour ago, rammygirl said:

Living in the UK with Aus assets/income.  If your only Aus income is bank interest you do not need to do a ATO return BUT you must inform the bank and they will deduct a 10% withholding tax to the interest. You also declare this on your UK return and get a credit for any ATO tax paid.

 

Good point about if you only have bank interest, I forgot to mention that.

[Fisher1]

7 hours ago, Marisawright said:

It didn’t put me out, I just wasn’t sure what you meant. You are right, I’d forgotten that US citizens Have to pay tax in the US even if they don’t live there. I have read that it’s the only country with that rule

So it would seem. However it seemed a good idea to check!

 

Edited August 18, 2020 by Fisher1