HiddenPaw

Hi

Does anyone know how the ATO calculate tax due on bank account interest? Is there a flat rate or is it pooled in with your other income and the rate calculated based on the overall total?

Just wondered as I submitted my tax return, settled my taxes and today received a letter from the ATO to say I hadn't declared my bank account interest. Although they said they will contact me in due course for any monies owing, it amounts to quite a lot of interest ($900) so I'm just trying to get an idea (if I can) what I'm likely to owe.

Thanks
HP

bondipom

Your interest earned is added on to your income.

HiddenPaw

Oh good!! Cheers BP

shoots

sorry for been a bit thick but we opened a oz saving account from uk and they take a withholding tax off our interest every month. We're moving to oz at the end of april so am i right in thinking we'll have to declare that interest as income at the end of the oz tax year and get taxed on it again

thanks

kirsty&al

Hello,

Any interest you earn before you arrive in Oz, to stay permanently, is not taxed by the ATO (other than the 10% withholding tax already mentioned). You are supposed to declare this interest as income to the Inland Revenue and you will get a tax offset for the tax already paid (for example, if you pay 20% on savings, in the UK, then you owe the IR 10%).

Once you become an Oz tax resident and you have notified the bank of your tax file number (TFN), then you no longer pay withholding tax but you declare the interest on your tax return and this gets taxed as part of your income.

Note that not supplying your TFN when you become tax resident means the bank will withhold 48.5% - so it’s best to do this quickly.

Regards
Alistair

Siren & Brian

Probably cos you havent supplied the bank with a tax file number so they have to take 48% tax, but you should get some back depending on how much you earn etc if your not in the highest tax bracket.

kirsty&al

No. It's because they are in Leeds (UK). Non Oz tax residents are charged a 10% witholding tax.

Siren & Brian

ok. stood corrected

OzTennis

So would the ATO notify IR of British residents who have paid NRT in Australia or is the onus on the Brit resident to declare to IR? If so, surely what they don't know won't concern them? (Says us who have paid NRT on our CBA accounts for at least 10 years without any questions being asked by IR and I wasn't aware that I should in theory declare the income, thinking it wasn't earned within the IR jurisdiction).

OzTennis

shoots

thanks for clearing that up for me but don't think i'll be telling the IR especially as it's not a lot of money involved


shoots

kirsty&al

Hello,

Since the introduction of self-assessment about 10 years ago the onus is now on the tax payer to declare any additional earnings or gains. In the previous system you could get away with saying nobody told me (or more commonly, "You didn't send me a tax return").

The IR taxes foreign earnings in the same way as the ATO. It calculates how much tax you would pay and then offsets that with any tax you've paid in the other regime. (If the IR didn’t encompass foreign earnings then everyone would have their bank account in the IOM or Channel Islands – these are foreign to the IR.)

It is worth noting that if you don’t have earnings from property then the IR has a limited time to query your tax return (if you completed one). This time limit is 1 year from the latest submission date (or from the date of submission if late) – so for tax year 2003-2004, the latest submission date was 31 Jan 2005 and they can query (start an investigation) up to 31 Jan 2006. If you have property income then this time limit becomes 7 years. If you haven’t completed a tax return I assume the same limits apply.

In addition, a few years back I found a (sort of) internal memo on the IR web-site that suggested that it was not worth agents chasing any tax mistakes that were less the £1k, although they would chase ones that were obviously fraudulent.

Regards
Alistair

brisnick

i've deliberately left my bank without my TFN (even though i work for said bank) as it's a nice bonus at the end of the year when i get tax back )))

mlbonner

My partner still pays his HECs out of his pay, even though he paid it off almost four years ago for the same reason (and also because his company are very slack havent changed it either) His total tax rebate was close to $10k last year, makes for a nice mid-year surprise!

bondipom

I prefer earning 5.4% on the full amount rather and take the benefits of compound interest rather than let the tax man have it.