Dubai Forums Dubai Expat Forums Dubai Expat Help Forum

They seek him here, they seek him there......the Australian taxman seeks Aussies every bloody where.....

Work has asked me to consider a great job opp in Dubai, but I am not totally comfortable with the Aussie tax system.
Especially given that it is one of the highest taxed countries in the world..........(No. 3???)

Apparently we are subject to FULL Australian tax whilst living in Dubai!
Tax sure/maybe but not that much surely??

If I go over am not planning on coming back for a few years or more, does anyone know if this means I am OK? I have done some homework and it looks like if I become a non resident that I will be alright, but even this seems vague...

Seeking advice - words of wisdom & experience

Gabs is the person who will know on here.

i'm pretty certain that the australian tax issue was covered on one of the threads about 3 months back. i think you have to work here for 2 years before you get a tax clearance/ deferment certificate

Two years-become a non-resident by informing your banks that you intend to become a non-resident and you pay a flat rate of 10 percent on income from your accounts ie 10% tax on your interest-this applies to your kids too even if the accounts are solely in their names. However you will pay a rate of 29% upwards on income from rental properties-there is no tax free threshold and the rate jumps pretty quickly. Suspend your health insurance for 2 years so you don't lose benefits. Get a good accountant and don't ring them (ATO) because one guy told me you only have to be away for 90 consecutive days (my accountant went ) and another told me the above. What determines your status as a non-resident is up to the tax dept. (they won't tell you-there isn't some magic formula apparently) telling the bank is a must though-do it in writing.

Gabs, Does this only apply for people who are payed by an Australian company and therefore receive an Australian group cert.
I am employed by a local company and my accountant told me that only if you are in Australia for more than 90 days/3 months per year, are you classed as a resident and are required to pay tax on ALL income. Otherwise you only pay tax on Australian earnings as a non-resident.

Thanks Gab. I thought as much. I will bite the bullet and ensure that I go to a go a good accountant first and then take it from there.

Thank you for the heads up on health insurance, rental income and on bank accounts. This is great information.

I found these two pages on the ATO site and although they give scenarios there does not seem to be any hard and fast rules - a bit hit and miss. For anyone who is interested :
URL: http://www.ato.gov.au/taxprofessionals/content.asp?doc=/Content/64144.htm

URL: http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~it~basic~exact:::AND~2650~basic~exact&target=EA&style=html&sdocid=ITR/IT2650/NAT/ATO/00001&recStart=21&recnum=23&tot=47&pn=ALL:::ALL

For our first posting overseas my husband went into the ATO and asked what criteria determines non-resident status. The answer was "it is up to us"-they were like some secret service agents that wouldn't let out any info!! Apparently it is a case by case determination-choose an accountant who has clients that work OS-ours is great.


Nice links BTW

Benwj-I am not sure-I am not an accountant. My understanding is that there is a 2 year rule.

Yes - definitely min 2 years for Dubai/Saudi etc. unless you have duel passports (for Aussie born). This much I do know - then it is oh so vague....

Better to go and not return in a hurry. No wonder so many Aussies leave Australia - besides the great opp and experience that the world has to offer of course: D

Again emphasis on telling the banks-10% tax or withholding tax at 40-66%!! (from memory-so check). The draw back to non-residency is the tax on income from a rental property but if you have bought well the increase in value justifies keeping it.

I spoke to the ATO last week about this.

The percentages above are correct howver it is only 10% tax on interest earnt on money in your accounts and 29% for rental income in OZ. If you buy a property in Dubai then you will be subject to Capital Gains tax if you sell your place back home.

You must be working overseas for longer than 183 days and visit oz no more than about 4 times per year. You must also be able to prove you have a permanant residence in one place (i.e. renting somewhere)

You also do not have to tell the ATO - but the banks need to know.

However! About 6 years ago I was on a working holiday in the UK and didn't know or didn't do any of this and there wasn't a problem - I guess maybe beacuse you pay tax on income in the UK?

Capital gains works in a strange way too-I think if you check you'll find that it depends when you bought your property and I have a funny feeling if you've lived in it etc. A good accountant is the answer!!

Some countries have tax agreements or some such with Australia-I know if you work in New Zealand you pay NZ tax and then you pay the difference in Australian tax (ie what you would have paid in Aust. tax minus the NZ tax you paid).

CGT is not applicable if you sell your main residence back home - even if you buy a place in Dubai. Varying discount rates area applicable pre 2000 dependant on year of purchase, post 2000 its a flat rate.

I would also suggest you get your (prospective) employer to fork out for a pre-departure interview with a big four, although PWC and Delloites are the only ones I'd consider, to get your best case by case advice - its roughly $500-600.

As far as I am aware you pay tax in OZ if the country you are in does not have tax. If this is the case you only be exempt if:

- you are a non resident for tax purposes.
- the foreign country has a law that grants income tax exemption to you because you fall into a special identified category (for example, a visiting aid project worker)
- the income was exempt because of a memorandum of understanding (MOU) with the country you are staying in
- the income consisted of supplements paid under the Australian Staffing Assistance Scheme paid in Australia for overseas service, or
- the foreign country levies a tax on employment income but does not have a system of collection in place. (For example, it may not have a collection system equivalent to our pay as you go withholding system.)
- blagh, blagh.......

All heavy stuff ........check out the URLs above

jeez, i have been here now for six months and looking to buy a property....wonder if i will still be eligible for my first home owners???????????

My understanding of tax in UK/Australia/NZ is that if you are non-resident then you won't pay tax on any income earned overseas (although I have read articles recently that the UK is looking to change that and implement a system similar to the US where you are taxed on all income irrespective of residency status). There are many Australians living here who are not taxed on their income here.

If you obviously leave Australia with the intention of living and working overseas then I would have thought you'd be ok. But things like leaving a car behind, a house not rented out (so you can use it), bank accounts, will indicate to the tax department that you intend to return to Australia.

I actually managed to get a letter from my home country tax department a few years ago confirming that I was regarded as non-resident for tax purposes. Funnily enough, when I did contact them a few years later to fill in a tax return (I was generating some income there), they had me as "deceased" on their files .

For a definitive opinion, you should probably go to a tax lawyer/accountant if you get no joy from the tax department.

guyfromsydney wrote:jeez, i have been here now for six months and looking to buy a property....wonder if i will still be eligible for my first home owners???????????

First homeowner's grant has nothing to do with the tax department. Its a federal government intiative. But if you're away and buying for investment purposes then you wouldn't get it anyways.

If you get the first home buyer grant of $7000, you need to live in that house for 6 months within the first year of buying. But if you live in Dubai and rented it out, you will get caught.

The best thing then would be to wait until you get back to Australia or just ignore the $7000.
Also, if you don't live in the house for the first 6 months (then considered as investment property), you don't get the huge stampt duty exemption you get in NSW, even if it is your first home!!! tricky Howard govt !

Actually you can buy a property as an investment if you connect the power and telephone in your name.

However not earning any money in Oz will set the alarm bells ringing

This is exactly the topic I was looking for!

This may sound stupid, but I dont get the bank thing......?
Why do I have to inform the banks that I am beoming a non-resident?

If I close down my Australian bank account (but I will still have an Australian credit card account) and have no debts here (no car, house etc) do I still need to do something with the ATO?
Like, tell them I am leaving the country for a few years?
Is there any way I will have to pay tax on anything I have earned in Dubai when I finally do return to AUS?

I dont really get it! But I really don't want to pay tax on my earnings while living in Dubai - thats the whole point of coming over!

Thanks in advance

Tassie Nell wrote:This may sound stupid, but I dont get the bank thing......?
Why do I have to inform the banks that I am beoming a non-resident?

So they deduct less tax on the interest they pay you. And it's one more thing that shows the tax department you've left the country. If that's minimal, it probably doesn't matter. And also so they send statements to your new address.

A bank account on its own is unlikely to affect your tax residency status but I'm no tax lawyer.

Is there any way I will have to pay tax on anything I have earned in Dubai when I finally do return to AUS?

Yes, if the tax department decides you're resident for tax purposes while you're away.

Note that tax residency status is not the same as physical residency or domicile (and they can both be different too).

sharewadi wrote:So they deduct less tax on the interest they pay you. And it's one more thing that shows the tax department you've left the country. If that's minimal, it probably doesn't matter. And also so they send statements to your new address.

Banks are not legally registered as withholding tax entities, as such they do not 'deduct' tax on interest income. Their job is to pay/collect interest earned/charged, your job is to declare it.

XRW-147 wrote:Banks are not legally registered as withholding tax entities, as such they do not 'deduct' tax on interest income. Their job is to pay/collect interest earned/charged, your job is to declare it.

Ah, ok. My comment was based on my bank deducting withholding tax but it's not in Australia. I was making a generalisation which would appear to be incorrect ...

Thanks........

So, if I only have a credit card account in Australia when I move over to Dubai - I should have no worries in the ATO seeing me as a non-resident for tax purposes? (which then means I won't have to pay Aus. tax on my earnings)

Or are you saying that there is still an issue with my credit card account, because I pay interest on it? They dont pay interest to me.
Oh, I dont know!! I guess if I tell my credit card company (Commonwealth Bank) that I am leaving the country, and change my address I should be fine.

Because other than that, I won't have any financial ties to Australia.

Guys,

Let me clear this up once and for all.

It is ALMOST imposible to definitively determine for sure if you will or won't be taxed if you go work in Dubai.

That is ALMOST. The ATO don't want to encourage it, so they make it extremely difficult for you to find out.

Bottome line - You pay NO personal income tax in Dubai ONLY if you are considered a "non-resident of australia for tax purposes".

To find out if you will be either a resident or non-resident, follow the following link to the ATO website test for people intending to leave Australia for work.

http://calculators.ato.gov.au/scripts/a ... eaving.XR4

Cheers
[/url]

Tassie Nell wrote:So, if I only have a credit card account in Australia when I move over to Dubai - I should have no worries in the ATO seeing me as a non-resident for tax purposes? (which then means I won't have to pay Aus. tax on my earnings)

You're looking for a definitive answer from people who are not in a position to give one. Repeating the question won't change that. Commercialaussie's answer sums it up best.

I (meaning me, not you) would (and have) keep my bank account open. I don't have a credit card from home country but if I did I would keep it (and I wish I did - there's been times it would have been useful to have it). And I know for sure I am non-resident for tax purposes.

But remember I don't speak for ATO, main bank account is not in Australia, nor am I Australian so I guess my answer is worth almost nothing to you ...

Before you throw up your hands in exasperation and close your accounts, talk to a tax accountant or lawyer where you live. It's easier to keep your account open than to open a new one from here.