Tax advice for individuals moving to Australia permanently
If you are moving to Australia permanently, you should contact King Lawyers as soon as possible and get legal advice on your Australian tax affairs. It is important that you understand the Australian tax system and know your tax obligations under the Australian tax laws. If you fail to comply with the Australian tax laws, you may have to pay heavy penalties and fines to the Australian Taxation Office (ATO).
How many people are moving to Australia permanently every year?
Thousands of people are moving to Australia every year to start a new life. However, most of them have little or no knowledge of how the tax system works in Australia .
Based on the latest data published by the Australian Bureau of Statistics (ABS), the net overseas migration to Australia is about 260,000 people per year. Most of the new migrants live in New South Wales, Victoria and Queensland.
Income tax implications of becoming an Australian 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.
If you are moving to Australia permanently with the intention of living in Australia, you will be considered an Australian resident for tax purposes. This will require you to declare your worldwide income to the ATO and pay income tax in Australia on your income.
Once you become an Australian tax resident, you will also be able to claim the benefits of the Australian tax system. For example:
- You can claim the tax-free threshold (the current threshold is $18,200)
- You can claim tax offsets to reduce your income tax liability
- You will generally pay lower tax rates than a foreign resident
Foreign annuities, foreign pensions and foreign superannuation from overseas
Generally, once you become an Australian tax resident, you will need to pay tax in Australia on your foreign pensions, annuities and superannuation.
If a part of your foreign pension, annuity or superannuation income represents your personal contributions being returned to you, you may be entitled to a deduction for that portion of the payment.
If your foreign pension, annuity or superannuation is taxed both in Australia and in the country that paid it, and you pay the income tax in the other country, you may be able to claim a foreign income tax offset to avoid double taxation of the same income.
Overseas properties and assets
As an Australian tax resident, any income or capital gains you make from your overseas properties and assets is generally taxable in Australia. This means that you have to declare it in your Australian tax return that you will need to lodge with the ATO every year. If you have paid tax in another country on that income or gain, you may be entitled to a foreign income tax offset to avoid double taxation.
When you become an Australian resident (other than a temporary resident), you are taken to have acquired certain assets at the time you became a resident for their market value at that time. However, this rule does not apply to assets you acquired before 20 September 1985 (pre-CGT assets) and assets that were taxable Australian property.
Offshore bank accounts and interest income
As an Australian tax resident, you will need to report interest or other income earned from overseas in your Australian income tax return. If you fail to do so and you are audited by the ATO, you may have to pay a heavy penalty to the ATO. This can be up to 90% of the tax shortfall.
Financial year in Australia
For Australian income tax purposes, a financial year starts on 1 July and ends on 30 June of the following year. As an Australian tax resident, you will need to lodge an income tax return with the ATO for each financial year and report your worldwide income for that period to the ATO.
Deadline for the lodgement of your income tax return in Australia
Generally, Australian tax returns are due by 31 October of each year. However, if you are lodging your tax return through a registered tax agent in Australia, you may be entitled to an extension of time.
Are you an Australian resident for tax purposes?
The following examples 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|
|are an overseas student enrolled in a course that is more than six months long at an Australian institution||an Australian resident for tax purposes|
|are visiting Australia, working and living in the one location and have taken steps to make Australia your home||an Australian resident for tax purposes|
|are visiting Australia and for most of that time you are travelling and working in various locations around Australia||a foreign resident for tax purposes|
|are either holidaying in Australia or visiting for less than six months||a foreign resident for tax purposes|
|migrate to Australia and intend to reside here permanently||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 experienced 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.