Tax Residency Status

[RoEire]

Hello

How are you all? I have a question re: tax residency that I was hoping someone could point me in the right direction of an answer for.

We've recently found out that I'm pregnant (very early days!). It hasn't come at a great time, as we're both being made redundant in mid-January, so just trying to get all of the information we can get and put our ducks in a row.

Financially - we're very worried, as it would mean it's unlikely I would find more employment before the birth in early June, leaving us with a large gap! 

In relation to Residency for Tax Purposes, as I understand it to qualify as an Australian resident for tax, we need to be in the country for 6 months as I understand it.

OPTION 1:

We're considering heading back to our home country for a year so we could get some family support, but don't want to wait until January 1st (to be tax resident) for that to happen as with the current COVID climate, I'd be very nervous flying at 5 months pregnant - we might not get our exemption to leave, or could be COVID complications on flights etc. etc. 

However if we leave earlier - does that mean we could end up with a massive tax bill if our residency status changes? We're due redundancy payouts etc. so our tax bill would be very large if that was the case I'd imagine, as it would look like we earned a lot in the first 5 months of the year.

 

OPTION 2:

Wait it out in Australia (which would be a struggle as I may not get another job, and we don't qualify for Centrelink), the baby is hopefully born in June and we may go home to our families in September. Again, this would throw up the residency issue, as I understand it. I would have been on PPL for 18 weeks, and my partner would have hopefully worked in that period. Would we again be likely to have a massive tax bill?

 

How is it monitored? I'm not suggesting doing anything dodgy at all, but I'm wondering how exactly they are aware if you are in/out of the country in these circumstances? Do they have automatic ways of monitoring it? Is it a random audit? I'm just trying to understand.

 

Any advice appreciated!!

 

Ro

 

 

[Marisawright]

I am pretty sure you've got it backwards as it won't matter how many months you earned the money over.   I would strongly suggest you have a consultation with a tax agent - @Alan Collett would be worth contacting.   One consultation won't cost the earth and you'll get solid advice on the best way to handle the payout. 

[Ken]

You haven't provided enough detail as to why you think you're not tax resident but I suspect you think it's something that applies separately to each tax year and that you have to be in Australia for 6 months every year? However once you become tax resident you remain tax resident until you do something to cease it (such as becoming tax resident elsewhere). If you permanently depart the country part way through a tax year you should be tax resident for part of the year and non-resident for the remainder of the year. Tax Residents who leave Australia temporarily and not permanently have difficulty shaking their tax residency.

[RoEire]

Thanks Ken. You're spot on in how I was thinking. I thought to be a tax-resident, you had to be physically in the country for over 6 months of the year, so by us applying for an exemption to return to our native country on the basis that we were re-locating there for a year, I thought this would flag up issues with our tax residency status. Just very worried about losing our tax free allowance and ending up with a tax bill when we'll already be financially stretched!