Tax advice for individuals leaving Australia permanently
If you have are leaving Australia permanently, you should contact King Lawyers before you leave and get legal advice on your Australian tax affairs. It is important that you understand your tax obligations and comply with them after you leave Australia. If you fail to do so, you may have to pay heavy fines and penalties to the Australian Taxation Office (ATO).
How many people are leaving Australia permanently every year?
Australians are great travellers and thousands of people leave Australia every year to start a new life in another country. However, most of them have little or no knowledge of the tax implication of leaving Australia permanently.
Based on the latest information published by the Australian Bureau of Statistics (ABS), about 100,000 people leave Australia every year.
Income tax implications of becoming a foreign resident for tax purposes
Australian residents are generally taxed on their worldwide income from all sources. Temporary residents of Australia and foreign residents are generally taxed only on their Australian-sourced income.
As a foreign resident for tax purposes, you are legally required to lodge an income tax return in Australia and pay tax on all Australian-sourced income, except income that has already been correctly taxed (such as interest, unfranked dividends and royalties).
Australian-sourced income is income earned in Australia and includes the following:
- employment income
- rental income
- Australian pensions and annuities
- capital gains on Australian assets
Tax free threshold when you leave Australia permanently
The current tax free threshold for Australian tax residents is $18,200. If you leave Australia permanently with the intention of living overseas, your tax free threshold for the year will be lower and needs to be apportioned. In those circumstances, you will be entitled to a fixed amount of $13,464 plus an additional apportioned amount (being $4,736 divided by 12, multiplied by the number of months you were an Australian resident for tax purposes, counting the month you left).
Capital gains tax issues when you leave Australia permanently
If you are leaving Australia permanently and stop being an Australian tax resident, you are taken to have disposed of assets that are not taxable Australian property for their market value at the time you ceased being a resident.
Also, it is important to note that non-residents for tax purposes are no longer eligible for the 50% CGT discount. This means that the 50% CGT discount can only be claimed for the ownership period that you were an Australian tax resident.
In the 2017-18 Budget, the Australian Government announced that foreign tax residents will no longer be entitled to claim the main residence exemption when they sell their property in Australia. This proposed change is not yet law. If the law is passed and you are a foreign resident when a CGT event happens to your residential property in Australia, you may no longer be entitled to claim the main residence exemption.
Superannuation issues when you leave Australia permanently
If you are an Australian citizen or permanent resident heading overseas, you cannot access or withdraw your superannuation. Even if you are leaving Australia permanently, your superannuation remains subject to the same rules. That is, you cannot access your super until you reach your preservation age and retire or satisfy another condition of release.
Higher education and student loans when you leave Australia permanently
From 1 January 2016, if you have moved overseas and have a Higher Education Loan Programme (HELP) or Trade Support Loan (TSL) debt, you will have the same repayment obligations as those who live in Australia. This rule applies if you already live or intend to move overseas for a total of more than six months in any 12-month period.
If you have a HELP or TSL debt and you are a non-resident for tax purposes, you will need to declare your worldwide income or lodge a non-lodgment advice with the ATO.
Updating your contact details with the ATO when you leave Australia permanently
When you move overseas permanently, it is important that you update your contact details with the ATO within seven days. This can be done by phone or online (via myGov).
Are you an Australian resident for tax purposes?
The following guidelines from the ATO are helpful in establishing whether you are an Australian resident for tax purposes:
|If you:||you are generally:|
|leave Australia temporarily and do not set up a permanent home in another country||an Australian resident for tax purposes|
|leave Australia permanently||treated as a foreign resident for tax purposes from the date of your departure|
Legal advice from expert tax lawyers in Australia
The content of this article is offered as general information only and should not be relied on as specific legal advice.
To get legal advice from King Lawyers on your specific circumstances, please contact us to arrange an initial consultation.