jasonK944

I phoned the ATO about tax rates today and how it all worked with me having had a UK income. In short its bad news as they will take into account the salary that I have earned in the UK when deciding the tax rate.

For example, I earned in the UK 29000 pounds between July 2003 and january 2004. This equates to roughly A$70 000.

A salary of this figure puts me into the higher rate tax band in Australia for the tax year July 2003 to June 2004. IF I earn any money between now and the end of this Australian tax year I will be taxed at 47%, meaning that almost half of what I earn will go in tax.

On top of this I will not be given the $6000 first tax allowance as once again I will have deemed to have been way over that amount based on my UK earnings.

Because I have been out of work now since January (when I arrived) and now need an income I am having to take any job that comes along. But even with a crapy low paid job I will still pay a high proportion of my earnings in tax. Makes you wonder if it is worth working at all.

NJFOZ

Crap news,

have you claimed a tax rebate from the UK?

I've just got mine!!

jayr

Before you scare everyone else, I presume that you were in Oz, then earned in the UK then returned to Oz?

jasonK944

No. I migrated here in January 2004. The ATO classifies me as an Australian resident for the TAX YEAR and take into account my total world wide earnings for the year. Just to clarify one point. I am not saying that they will tax my UK earnings, but they will take them into account when they decide my tax code.

dotty

Yes, but at the end of the year they take into account any tax you paid too, so it may not be as bad as it sounds.

The bit I dont get is, how do people arrive here then claim centerlink when in fact they have already had earnings in the UK which should at the end of the year be included in their OZ annual income? EG. People on here always posting about rent assistance, but at the end of the year any UK income is going to be taken into account too, so would they then not have to pay it back?

All I am sure of is OZ wants to know what income you have from anywhere, no matter what it is. And if you dont declare it they find it, we missed $143 of intrest, just such a small amount we never even noticed it, they found it 3 years later :scared:

Kiwipaul

I think you've got something wrong here, as you only became tax resident on say 1 Jan and anything you earned before that should be irrevelent. I agree you won't recieve $6000 tax free allowance but you will recieve $500 for every month you are here.

Also if you are here for less than half a year you can claim you are not tax resident yet in Australia as that is one of the critria for defineing tax residence.

I would def get independent expert advice or check the ATO web page.

jasonK944

I would love to be wrong and think that it is completely unfair the way the system works but I have checked with the ATO and asked the same question in three different ways and got the same answer. There must be somebody out there who has already gone through this and can confirm one way or the other.

jayr

All I can say is I don't think it happened to me in my first year here. Inland Revenue considered my whole UK tax year and gave me tax back based solely on UK income, ATO considered my whole tax year (and thus reduced personal allowance) based solely on Oz income as far as I am aware, and I'm not one to let the taxman have more money than I think they should have.

Kiwipaul

What happens in the situation of a new arrival arriveing on the last day of the Oz tax year, this would mean that the whole of his income in the UK (say) was now liable for tax in Oz. I agree he could claim tax already paid in the UK but as tax rates here are higher he would end up with a massive tax bill.

All references to Capital gains state that the investment must be valued on the day of arrival in $ to give a starting point for CG liability NOT the begining of the tax year. Any capital gain made prior to arrival is not RELEVANT.

When I arrived they didn't ask me what my income was in NZ THAT I am certain about.

MrsDagboy

This has me stumped, I think jayr & KP are right, when you come to Oz, when do they actually ask you how much money you have made previously in the financial year? When you start a job here, the employer doesnt ask you how much you have made for the rest of the year, your tax rate is based solely on your current income which your employer works out. The tax office doesnt know anything about your financial situation until you do a tax return, do they? At the end of the year when you do your tax return is a different matter. Are you confusing the 2?

Sausage

Bloomin' eck! 47% tax!? What a swizz!

jasonK944

Your employer deducts tax based on your earnings with that employer. At the end of the year everybody has to submit a tax return. Many people get a rebate because they have paid too much tax. However, other people, like myself I suspect will be expected to pay money to the ATO.

The question about arriving on the last day does not make sense. You will not be taxed on the UK earnings, the issue is to do with the tax rate you will pay in Australia (i.e the percentage of your Aus salary).

MrsDagboy

Ahhhhh ok, got you now, sorry I thought you meant that you would be paying 47% on your earnings when you earn them. You mean when you complete your tax return.

To start again from the beginning -

Dagboy came from the UK & started a job May 1st. His salary in Oz is taxed at the highest tax rate ie 47%, so his employer deducted tax at that rate. When he put in his tax return for that year he got almost all of his tax back (about $5k for the 2 months). He was on alot higher wage in the UK than you were.

Does that help?

Alan Collett

Hmmm ... I'm not sure about that advice from the ATO. This is a question that I think touches on the question of whether employment income that arises prior to becoming tax resident in Australia is what is known in Australian tax law as "exempt foreign earnings." In essence exempt foreign earnings are not directly assessable, but affect the rate of tax applicable to other assessable income.

The legislation (section 23AG of the Income Tax Assessment Act 1936 for those who are interested) requires that foreign earnings be derived while you are a tax resident of Australia - which of course isn't the case when you are a newly arrived migrant.

Taxation Ruling TR 96/15 discusses this issue in more detail - para 6 is the one to look at.

It's a very technical issue, and maybe one that the people at the ATO with whom you have spoken haven't encountered before ...

Best regards.

jasonK944

I dont understnd this at all. This issue MUST come up for every migrant who arrives part way through a tax year. The ATO must deal with thousands of cases that are similar to mine. Why is it not clear cut one way or the other?