Littlesky123

Hi Everyone,

Need some urgent advice !!!

I came to Oz from UK as a UK employee working for a UK ccompany for a period of three months with the intention of going back and resume my work duties.

I came with my wife & son to help them settle here as she secured a role here in OZ. We all have PR.

Now, due to some personal issues when I asked my UK employers if there is any possibility of extending my stay in OZ for some more time, they refused and said now that the inention of yours has changed to stay in OZ and not return, you will be charged tax in OZ and we will be liabe to pay to OZ government tax super medicare etc . They have given me an estimate of over £20K most of that is the processional services for the companies they will hire to sort out the payment of taxes etc. I am only here in OZ for 80 days so far.

When I asked this is too much to pay & happy to return back, resign and then leave, thy are saying that you cannot return to OZ for atleast another 10 months otherwise we will be liable, is this correct ? Can my UK employers liable for my actions on what I do afer I resign ?

I am confused here I don't have that kind of money to pay.

Can someone please advice what can be done in this situation, would b really very grateful for all the hep that comes my way !!!

Thanks

spouse of scouse

Hi, I can't answer most of your questions, but I think you need to see a tax accountant urgently. From what you've said I'd be surprised if the income you've been earning isn't taxable in Australia, at either the Australian resident or foreign resident rate (the ATO uses different definitions of residency than DIBP do). Maybe you've not yet reached the income threshold where tax becomes payable though - get some expert advice asap!

The BE member Bermuda Shorts is an expert in this field, cross your fingers that she sees this thread and can offer some advice.

In the meantime, you can do a quick check regarding your obligation to pay tax on the ATO site https://www.ato.gov.au/Individuals/I...tax-residency/

Bermudashorts

I think it is questionable that you could work in Australia for three months even and not be subject to any Australian tax. Who was your employer? Who directed and benefited from your work?

It seems quite possible to me that you should have been paying the higher non-resident tax rate all along. Certainly now you have decided to stay, of course you should be paying Australian tax, at least now it would be at the lower resident tax rates.

I do not get your statement that "you do not have that kind of money to pay". This is a % of earnings so you must have earned far more than you would be taxed. Not many people enjoy seeing tax deducted from their earnings but it is a fact of life. Is your concern that you have already paid tax in the UK? In that case yes I do see where you are coming from, the good news is that there is a dual tax treaty between the countries so that you are not taxed twice.

When it comes to tax, it is better to plan ahead and it would have been advisable to have seen an accountant before you embarked on this plan. Nevertheless I would suggest you will need one to help you resolve this now, one of the ones that deal in international tax matters like The Fry Group (no affiliation) will properly establish residency status in both countries and deal with the double taxation issue for you.

But in a nutshell I broadly agree with your employer, that Australian tax must be considered.

By the way I do not understand your question in bold about the employer and liability? This is your tax bill not theirs.

Littlesky123

Hi Bermudashorts

Thank you very much for your reply. Actually I accompanied my wife to Oz and I continued to report and work for UK entity. I have stayed here for nearly three months now. At the time when I was about to come, my employer said that if I back within
Three months to UK, I will not become Australian resident and will not be liable to tax. However now when I requested further stay here, my employer is saying,I will become Australian resident and will be subject to tax and they have to engage professional people for this and all this will cost around 20000 pounds. 80 % of this is professional fees.I don't have that much to pay for professional fees. I said I am happy to tax but they said even professional fees is payable. I then said to them, if I return to UK before expiry of three months and resign and then come back to Ozat some stage, they are saying even then they would remain liable as I would have spent over 183 days in Oz and they have to deduct tax.

My question is, will they remain liable for payment of taxes, superannuation on my behalf, if I return back and resign and may be later at some point decide to come back. Because working with them I would have only stayed in Oz for less than 90 days and as would have remained non resident.

My concern is not the tax but the very high professional fees plus their assertion that even after resigning they remain liable for payment of my taxes if at any point in future if I decide to come back ? As per them once I return to UK, I cannot come back for at least 12 months otherwise they are bound to pay and will hold me responsible for paying exbortiant professional fees.

Hope I have been able to correctly explain my situation., grateful if you could reply

Bermudashorts

Residency is not a black and white matter, it is not purely down to counting days and the exact details of your situation, your intentions and terms of engagement need to be considered. So you need to see an accountant in a professional capacity and they can go through this properly.

But a couple of things you need to note.

You appear to think being "non resident" means you don't pay tax. This is simply not true. Non residents can and do pay tax in Australia if they have income streams sourced in Australia. With respect to employment income the person deemed "non resident" pays an even higher rate of tax than the resident.

I absolutely agree with your employer that if you now decide to live in Australia you need to include the recent earnings in your Australian tax return. To me there is a questions mark over whether you should have been paying it anyway, that is for the accountant to determine when they have the full facts.

As for professional fees, I would tell them to get lost. Who is saying you need to pay nearly $20k in professional fees though? The Australian employer or the UK one?

Littlesky123

Hi Bermudashorts

Actually my employers did not change. I continued to remain UK employee and do what I was doing in Oz what I doing in UK. They allowed me to work from OZ for three months and the condition was I will return back within three months. If I returned then there would not be any tax payable in Oz as my salary income would have remained foreign income because I would not have become resident within three months but the whole issue of paying tax is arising because I asked them if I could stay for more time.

So my question is if I return back to UK and satisfy my employer condition and later on come back, will that be an issue for my employer. I understand once you become a resident you have to declare foreign income and pay tax and I happy to do that but don't understand their assertion that they will remain liable even after I resign. Do you think what they are saying is correct ? If I refuse to pay this fees can they take me to court in UK ?

Bermudashorts

I really think you need to sit down and discuss this with someone face to face.

So again just some key points, perhaps I was being too long winded before.

1. Being deemed non resident in Australia does not exempt you from Australian tax.

2. I think it is entirely possible that you should have been paying Australian tax anyway. I am not aware of any three month rule that your employer has referred to, that is not to say it doesn't exist and perhaps they took advice on this. (Despite the kind words of SoS, I would not call myself an expert in Australian tax, I have a working knowledge, but I am a UK qualified accountant).

3. If you decide to stay in Australia or if you pop back to UK and then return, then you DEFINITELY need to pay tax on your earnings since the day you arrived.

4. It is not your UK employer taking you to court that I would be worried about. I would be worried about ATO (the Australian tax authorities). You owe them this tax and they will get it. Why a UK employer feels the need to interfere even after you have resigned, I do not know. But one way or another you will need to pay up the tax.

5. I would refuse to pay professional fees that your employer decides to incur.

Littlesky123

Thank you very much for your reply, really appreciate all the time you took to respond to my query. I will speak to someone soon

Thanks

Bermudashorts

Upon reflelecting further. I do wonder if there is an employer trying to be awkward here too.

They are a UK employer, who allowed an employee to work remotely for a temporary period, the employee leaves and decides to stay in Australia, yes you need to pay Australian tax they are correct on tha point.

But as you are leaving their employment and they are a UK company, I don't see why they wouldn't just let the matter drop. From your perspective, I would sort your tax affairs out directly with ATO through an accountant of your picking.

Not an accounting matter, but I wouldn't waste one wink of sleep worrying about $20k of professional fees that this employer says they are going to engage and bill you. They haven't got a leg to stand on, actually I doubt they would do that. I think they are trying to frighten you for some reason.

Littlesky123

Hi Bermudashorts

Yes that's exactly my point. I am willing to resign come back to UK within the three month period which they gave and afterwards what I do should be my decision. Happy to engage with ATO declare all my earnings and act according to the law. I am going to speak to some lawyer soon and will see what happens. It's funny how they are acting...

Alan Collett

TR 98/17 - Income tax: residency status of individuals entering Australia (As at 25 November 1998)

I recommend having a read of ATO Ruling 98/17, and then discussing the issue with a tax accountant who is across tax residency issues - in the UK as well as in Australia.

Remember that the fees of a registered tax agent in Australia will be deductible on your Australian tax return, which has a value to you to the extent that you have a tax liability in Australia.

Best regards.

Littlesky123

Hello Alan

Thanks for your reply. I understand that I might have to pay taxes however are my UK employers liable to pay tax to OZ government i.e. any income tax / super / medicare on my behalf for the short period for which I came here ? If yes to arrange all this, they are going to charge me exbotitant professional fees will that be tax deductible? I entered Oz with the intention to return by 3 months. I am thinking of going back to UK and resign. So for the period for which I came here now, am i liable to pay tax ?

Thanks

Dorothy

I would recommend making an appointment with Alan Collett and speaking to him face to face. Besides being a registered migration agent, Alan is also an accountant.

Bermudashorts

It is your tax liability not your employers. There is certainly no obligation to incur huge professional fees and you need to put your foot down on that point.

Accountancy fees are tax deductible in Australia but these should be in the hundreds not thousands of dollars. No regular working person is going to get away with claiming $20k of accountancy fees. But there is no need for this anyway! Just don't go there, don't accept such ridiculous fees. Don't accept any fees, if you did not engage them then don't pay the bill.

Littlesky123

Hi Dorothy

Is Alan based in Australia and If I want to make an appointment, is there any direct niumber to reach him. I went on his website there is the General Enquiry Form I have filled, that form it says someone will contact me but I am eager to speak to Alan. Do Alan charge a lot for his time ..do you know ?