Bert'n'Stella

Hi All,

Need some (free!) advice.

Started doing tax returns for us for 05/06. We have been in Australia since end Nov 05, so have a $4000 tax free threshold - thats all fine!

My query is - I have been up/down inside/out and roundabout the ato site, to find out if we have to include UK income from July - Nov 05 into our tax return. I know that it is tax exempt, but it rambles on about wanting to know as this will influence the tax rate applied to your Aus income. Now we are both Australian residents for tax purposes - fine. BUT, in the e-tax advise it says

'if you were an Australian resident and you received income from overseas, you must show your assessable foreign income here even if tax was taken out in the country from which the income came. Foreign income that is exempt from Australian tax may still be taken into account to work out the amount of tax you have to pay on your other income'

I have bolded the word 'were'. Technically at that time Bert was not an Australian resident - so does he have to do any of this? Can he just do his Oz income? I think for me (as an Aussie) I am stuck including all this shite (unless someone can tell me why I am not)....

Any help greatly appreciated. I am usually good at tax and understanding the terms but this bit is driving me batty. We paid tax on everything in the UK, but if it has to be included here it really raises the tax rate (I did a sample) and we will end up owing a fortune.

S


(c) Australian Taxation Office 2006

dani

Just pay th ~ $100 and get a tax expert to give advice and complete the return. Not worth the stress!!

Bert'n'Stella

Thanks - I have used a tax agent once - funny enough it was the only year I ever had to pay the ato money (rather than get a refund). I would rather not spend the dosh if I dont have to.

Sass73

From what I understood when I did our first tax return was that as you weren't Australian residents at the time, your taxable income from the UK doesn't come into it. The only income they are concerned about is what you have earned since you have been residents. As for you, as you weren't resident in the country at the time, I don't think you will need to include your UK income either (plus, you've already been taxed on it once). Rather than get a tax agent, you could always phone the ATO. It would be free and I'm sure they will be happy to provide advice on this. Hope that helps.

cresta57

Accountants fees are fully deductable so you don't pay, the ATO do, in a round about sort of a way.
Weird that you'd consider taking the word of someone you've never met on an internet forum over an accountant specialising in tax returns You wouldn't take your car to the greengrocers for a service would you?

ianandhelena

no you don't need to include income derived before you became resident for tax purposes; see section 6 of this ruling.

MartinLuther

The ATO wont pay for all of it. Tax deductible just means that you get the tax back on that amount. So if you pay the accountant $100 and your marginal tax rate is 31.5 then you still end up paying $68.50.

As for the OP. The ATO are not interested and have no right to anything you earned before you became tax resident. You must declare all income (and gains) made since you became resident - regardless of where it was earned.

You should also declare any tax paid on UK earnings as this will stop you being taxed twice. The tax agreement between the UK and Aus means that you wont be taxed twice. If the Aus tax calculation comes to more than the UK tax then the ATO will take the difference.

"Foreign income that is exempt from Australian tax" probably wont apply to you - unless you are an actor or something else that has special tax treatment.

It is worth talking to people at the ATO as they are generally very helpful.

Pollyana

I had the same query the first year I was here.
What happens is, you work your way through the online tax thing, quoting the figures from your AUSTRALIAN wages. At some point it asks you if you have been an Aus tax resident for the whole year. If not, then you enter the date on which you became one (ie, the date you arrived here). The only UK income they are interested in is that which you earn AFTER your arrival (ie after you become a tax resident). You don't need to include the wages you earned before you emigrated.
The same applies to Medicare - it calculates from the date you arrived.

brisnick

Also note that an Australian Resident and an Australian TAX Resident are two completely different things.

Even as an Aussie, if I leave and go back to the UK and work for more than 6 months, then the day I leave I cease to be an Australian Tax Resident and any income I earn is not subject to Australian Tax when I return. Once I intend to stay in Australia for more than 6 months again, I become a Tax Resident and then any foreigh income is subject to Aussie Tax.

cresta57

I don't follow the logic on that scenario
If I engage the services of an accountant I submit his bill as an expense incurred in the running of my business, therefore the pre-tax profit is reduced by whatever his bill comes to. In other words instead of the ATO getting $100 bucks extra the accountant gets the $100 bucks. I'm no better of financially but I've gained professional advice that's probably saved me money in the long run.
As I understand it if you pay an accountant in one tax year you claim it as an expense the following year.
I'm sure there's a few accountants lurking that would/could clarify.

thebears

Absolutely - used to work for the NZ equivalent and we loved helping people out - it made the job more worthwhile

Bert'n'Stella

Your absolutely right Cresta - some complete stranger I don't know advised me to go to a tax agent, so why should I listen to them?

I have asked for advice because I imagine there are a number of folk on this forum who have 'been there, done that'. I think a lot of the questions on this forum are posed for this reason - in regards to immigration or otherwise. If I had asked a question about immigration, you yourself may have had the answer and suggested it. By the logic of your reply we could deflect all questions on the forum to organisations that could provide more accurate answers, rather than give opinions or experience.

Oh, and based on the delightful mechanics we have up here, my money is on the greengrocer to do a better job and for half the price!

To be honest if I needed a mechanic or otherwise, at least in Mackay, I would be better off asking everyone I know first, about who to use. Their experience and knowledge (and contacts) are much more valuable than a yellow pages ad.

S

Bert'n'Stella

Hi Pollyanna,

Thanks for this - I understand now. I imagine if Bert came out to Oz, then went and worked in the UK for a bit, then came back, then he would have to include those earnings. But as this didn't happen he is off the hook (and into refund territory!). As a dual citizenship holder I'm not completely convinced on myself, but I think it will be ok - still searching on that one!

S

Bert'n'Stella

Thanks for this....
Yer, Bert tried to call them twice today, but was on hold for over 20 minutes. Obviously end of financial year they are at their busiest....

S

Wife Beater

And we don't all run a business but are employees who have to do a tax return.

Last year I got a whopping great tax rebate, several thousand dollars, wont be so lucky this year though.