Changes to Aussie tax exemptions

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  1. #1

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    Changes to Aussie tax exemptions

    Just read in KRudds new budget summary that they're going to drop the tax exemptions for Aussies working overseas as of 1st July (eg 90 day rule etc). The only exemptions will be Aussies working for charity or the gov't somehow (diplomatic or defense etc)... my take on it is if one can prove they are a non-resident then they are exempt, but if a person is only in HK on a 1yr contract, they may not be able to sufficiently prove they are a "non-resident"...

    anyone in the know have some words of wisdom on this? this aint my field of expertise...


  2. #2

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    I am no expert on this either. But my understanding is the proposed change only applies to Australian tax residents with foreign employment income. Therefore, as long as you are considered a non-tax resident, you don't have to be subject to this change. There are detailed rules and examples on ATO's website regarding residency status for tax purposes.


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    that's prety much what i said in my post... however, the info on the ATO website is for current tax exemptions, not for the proposed budget... also, KRudd hasapparently threatened to call an early election in a hissy-fit if his budget is not accepted...


  4. #4

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    Quote Originally Posted by dropdedfwed:
    that's prety much what i said in my post... however, the info on the ATO website is for current tax exemptions, not for the proposed budget... also, KRudd hasapparently threatened to call an early election in a hissy-fit if his budget is not accepted...
    Sorry I probably didn't make myself clear. I was talking about the residency rules on the ato website, not their current regulation on the tax residents and their foreign employment income(that has not changed of course). If you can find yourself satisfying the non-tax resident conditions, then don't worry about this change. Here is a more detailed ruling regarding residency: taxation ruling no. IT 2650. See whether you have a 2 year or more employment contract(as a rule of thump) plus the other conditions listed in the ruling. Good luck!

    Pardon me for having missed most of your original post as I was so shocked by this proposal that I immediately jumped up to google the article instead...
    Last edited by OZTOHK; 14-05-2009 at 05:44 PM.

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    Thanks for that mate. I had read the residency tests on the ATO site, I guess I was wondering if anyone knew whether the rules for residency would also be affected, which is why I mentioned them in my original post (I know i didn't specifically say "resident for tax purposes" however that's wot I meant ). It'd be intersting to see if it effects people moving mid financial year, or whether it means once you have made the move you are considered non-resident. It does mean if you still run a car and house and have close family (eg wife/partner) in Oz you will likely be taxed in Oz, unless you can convice ATO you are a non-resident... from what I can see...


  6. #6

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    Warning: topic below can be very boring to some viewers...

    I had never worked for ATO myself. So here is my best guess:

    I don't think the residency test would be affected(for now). However, they would be more strict/vigilant on enforcing the residency rules. Currently even foreign employment income of >90 days is exempt, so they wouldn't worry too much if someone is say on a 1 year contract. It would be exempt anyway, especially if he/she is not claiming any social welfare payment. However, since the proposed law is mainly to generate more revenue for the government(judged by the $57 billion deficit we are having), they would scrutinize more on the length of the overseas employment contract, plus any additional proof to determine whether someone should be considered a tax resident, such as owning property in OZ, existence of close family ties etc as you mentioned.

    On the other hand, for people working overseas(as per IT2650), I think they put more emphasis on the 'permanent place of abode' test. Permanent is in contrast to 'temporary or transitory', not 'everlasting or forever'. So if someone has a leased property overseas of a reasonable length(better still if someone bought their own property overseas) where he/she lives with the families and sleeps at night, they would be considered non tax resident even they still own their property in OZ whether or not they have rented it out.

    Obviously we(speaking for ourselves) came to HK with one of the key reasons being the low taxes here. Of course we don't want to be caught by this. If, however, something as radical as changes to the definition of tax resident happened, we'd be moving back as fast as we could.

    Last edited by OZTOHK; 15-05-2009 at 12:24 PM.

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    Quote Originally Posted by OZTOHK:
    Obviously we(speaking for ourselves) came to HK with one of the key reasons being the low taxes here. Of course we don't want to be caught by this. If, however, something as radical as changes to the definition of tax resident happened, we'd be moving back as fast as we could.
    ... or emigrating as fast as we could...

  8. #8

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    I just rang the dude at the treasury department who is in charge of all the queries relating to this new change because I cannot for the life of me completely ever understand new rules. Even he admitted that the press release read a little too ambiguously and they are considering releasing another.

    Anyhoo he said its very simple, if you are a non-tax resident of Australia this DOES NOT concern you. There are no proposed changes to the residency rules. This is simply to annoy the poor expat who has to go and work overseas for 6 months whilst still being tax resident in australia.

    He did say to me to ensure that we remain non-tax resident and to ensure we stayed on top of that with our financial advisors.


  9. #9

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    Quote Originally Posted by dropdedfwed:
    ... or emigrating as fast as we could...
    Good thinking...but we are here not even for 7 months yet, let alone 7 years..and I don't know where else we can emigrate to???

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    Thanks for that info mumto2. Very helpful..


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