Guitarfish

We're about to ship out in mid-september, which I think makes us 'resident' for tax purposes for 2006/7. Three questions arise:

1) My redundancy pays out end of August, which in UK would normally be tax-exempt. Does anyone know if the Aussie tax-man is gonna sting me?

2) I have a Cash ISA which I'm thinking of leaving back in the UK as a safety net in case it all goes horribly wrong. Same question - will the Aussie tax-man take a slice of the interest.

3) Similar to 2, but Stocks and Shares ISA. I know that UK Capital Gains are normally taxable in Aus, but does the ISA wrapper make any difference?

I realise that this is pretty specialist stuff, but I'm struggling to find info on the Australian Tax Office website, so any previous experiences with this would be very appreciated!

Links to other good resources or recommendations for professionals to unscramble this stuff also very welcome!

cheers, Chris

GinaUK

1) You'll be doing a UK tax return for the tax year ending 5 April 2007, which will include all your UK income from 6 April 2006 till the day you leave for Oz (let's say that is mid-September). You'll include any lump sum redundacy money on your UK tax return (and if that is below £30k, then it's tax free).

2) Yes, Aussie tax man will want a slice of the interest from the day you entered Australia till the end of your first Aussie tax year (30 June 2007, I think), and then for each tax year thereafter until you cash it in.

3) ISA wrapper does make no difference. Aussie tax man does not recognise "ISA". In other words, same answer as for 2) above.

BUT - (there is always a "but"), Australia has tax free allowances (along similar lines as UK), and if your interest from these ISAs is within the tax free allowancce, then you don't pay any tax.

You can do your Aussie tax return online (like the UK one), i.e. just put the figures into the boxes and it'll do the calculations for you.

Gina

worzel

I am an accountant but no expert in Aussie tax so don''t take this as gospel but:

UK income before you become Australian resident isn't subject to Aussie tax.

You will get a pro-rata-ed tax free limit in your first year but all the benefits of the other bandings in full.

UK income from July to arrival IS taken into account for calculating your family tax benefit though.

Your ISA (or any savings in the UK) will become taxed in Australia once you get here, so with higher interest rates here you may as well ship the money across. Not sure about shares in ISA's.

I attempted my 2005/06 tax return electronically last night and even with our very simple affairs (salary and interest pre and post move only) I have a list of questions I need to find out about:

Can we elect for bank interest to be anything other than 50:50?
I am not clear where (if anywhere) I need to disclose UK income between July and arrival in October (I worked for less than 91 days in that period)
Has interest been withheld on bank interest like it is in the UK?
If I didn't do the UK tax declaration to avoid being taxed on a little bank interest in the UK can I reduce what I pay on it this end?

I may spend a couple of $hundred to get someone to do the first one for me in case they can save me money!

worzel

You type faster than me! One thing worth saying about that is once you have your P45 etc you can claim a refund (that will probably be due as tax is withheld on the assumption you will carry on earning at the current rate all year) before you leave rather than waiting until the end of the UK tax year. Mine took about 3 weeks to come through. There is a special form but I forget what it is called.

Alan Collett

- What is your visa category? If a temporary visa you may have little or no Aussie tax liability ...

- There are some tax factsheets here which may be of interest:
www.collettandco.com

Best regards.

Guitarfish

Hey, Thanks for lightening quick replies and really good info! Very glad I keep my redundancy cash !

I've just been having dig around for tax allowances, and as far as I can see, there is no seperate allowance for interest or 'capital gains' - it just get's lumped in with your income . In which case, presumably as soon as I start working we'll use them all up and have to pay full rate tax on any gains made by the stocks & shares ISA when I cash it in?

From what's been said already, I think that if I offload them before I go I should be able to avoid tax in Aus for 2006/7?

It's a Partner Visa, so temporary for 1st 2 years. Does this help me?
Thanks for the link - I'll check it out later.

Worzel. Thanks for the heads up on the refund - I've found the form. For anyone else that might want it, it's here: P85

Great info folks - thanks for your help!

Chris

kitty4

My husbands company pension is and will be paid from the UK when we become permanent residents in Australia. Will he have to pay both UK and Aus tax on it? This would seem a bit ( a lot) harsh?

caleb2003

I was told that you only pay gains on interest accrued since entering Aus, rather than from when you too the ISA out.
It is not good for me either as I have built up some money in ISAs but it will all be taxed as foreign income even though I won't actually recieve any income from them as any gains reinvest in the ISA, so if it makes 1k and that just adds to the fund then I never see the money (until I cash it in) but I have to pay income tax on it!!!!!!!!!!!!!!! NOt good.

Personally I was thinking about leaving a little in the foreign ISAs and taking out some Aussie Funds as I believe there are some tax breaks for doing that.

thebears

Just be very very careful on the wording in the settlement. Alot of companies have recently got it wrong and cost the employees dearly. The difference can mean the whole £30K becomes taxable and more than likely in the top tax bracket!!!!

Wol

No. You apply to the Inland Revenue to have the pension paid free of tax: they instruct the pension fund to do that and you declare it as income on the Oz tax return. So you pay no UK tax but do pay Oz tax. The year you emigrate is split in both countries.

kitty4

Thanks Wol.
Very useful info.
Cheers
Kitty

Alan Collett

Watch the position in respect of the lump sum retirees often take from a pension at retirement ... tax free in the UK does not necessarily mean tax free if you are a tax resident of Australia at the time.

Best regards.

savanna454

Correct me if I'm wrong but don't you need to be a resident or ordinarily resident in the UK for tax purposes to have an ISA or continue to hold them?

thebears

You dont need to be resident to hold them no - but you do to contribute to them. Their tax status however changes dependant on your country of domicile.

Sue from Manchester

UK income from July to arrival IS taken into account for calculating your family tax benefit though.


.. Now I'm puzzled. I rang their helpline the other day and they didn't want to know anything about hubby's UK income before coming here for family tax benefit claim. I arrived 1st July 05, he only came 26 April. She went away and asked supervisors and said just put zero for his earning. Can anyone enlighten?