colinmorgan

Anyone else received a rather large tax bill for 05-06?

Just been hit with a bill for $6500:curse:

Colin

rossifumi

How and why? On what amount?

colinmorgan

The difference between UK tax already paid and the Oz tax rate (43.5%) on approx UKP9000

Luckily I made a loss on the UK rental income!!!

Colin

tillysmum

Colin do you work as well as the pension otherwise you have just sent my husband into orbit.
we are hoping to move later this year and he will have a pension of around £14.500 ($35,000)and was told by friend that you dont pay full tax in both locations!!!!!!!!!
jill

Wendy

You should only pay tax in the country you are resident in. If you are living in Australia, then you are liable for tax in Australia on your worldwide income at the folowing rates:

http://ato.gov.au/individuals/conten...u=5053&mfp=001

More info here:

http://ato.gov.au/individuals/conten...tent/64131.htm

Whether or not you pay tax in the UK I'm not sure, but any tax you did pay there I would presume you'd be able to receive as a credit against your Aus tax.

GaryKristensen

You can apply for tax relief at source for military pensions. Form P85 rings a bell, but it is all on the UK IR website. It's because the UK and Aus have a double taxation agreement so you only get taxed once.

Was you not declaring the pension income into Oz? It's bound to catch up with you! Not worth the risk IMHO!

lilstewie

Try the following link to the form which will prevent you paying tax on your hm forces pension in Oz- you can have it paid gross into your Oz account.
http://www.ato.gov.au/content/downlo...RevenueFD2.pdf

The form should be sent to the Aussie tax office, who will forward it to the UK Inland revenue-i think.

If you have any other queries, try contacting the paymaster general in the UK. They deal with the payments of Forces pensions, just google them.
Cheers
Neil

colinmorgan

Thanks for the reponses guys.

More detail:

a.UK pension (Approx UKP9000) declared in Oz from day 1 - Nov 04

b.UK tax paid in UK on pension.

c.Credit for tax paid in UK included in Oz return.

d.Oz Army wages taxed at source = Tax refund after expenses.

e.UK rental small loss.

f.Oz tax @ 42% on pension - not 43.5% as stated by accountant

I haven't received the paperwork yet, just a phonecall from a nervous accountant!! Hoping to find an error in his calculations.

Cheers

Colin

GaryKristensen

Colin,

If you are having to question the accountant's figures and facts, I'd say you are employing a duffer!!! Sack him/her and get a different one who is able to do simple research.

As a military man, you will be on a permanent resident visa with citizenship after 90 days, so you will have been classed as a perm res from day 1 of arriving, which mean't all of your military pension from the UK should have been declared to the oz tax people. Paying tax at source in the UK does not offset this responsibility to the Oz tax establishment, as it is still classed as an extra income, on top of your military salary.

What I'll be trying to find is a way of reducing the pensionable income legally, to avoid going over the $75,000 tax threshold, which might prove quite tricky, as my pension will be worth around $25,000 a year and my base salary will be $60,480 when I start with the ADF in November this year!

If anyone can help on this front, it would certainly be appreciated by quite a few of us I imagine! Just witholding it in a UK bank account is not good enough, and neither is it legal, as it is then not being declared to the Oz tax people. They will catch up eventually, and it will probably end any military career due to lack of integrity and honesty.

Please keep us informed of how it goes, as I will be interested in the outcome.

colinmorgan

Hi Gary,

My accountant is not a duffer and sadly I know his figures will be correct - He also handles my business accounts.

I will also be looking for ways to offset my UK income for future tax returns.

Cheers

Colin

JAJ

Why are you paying any UK tax? Have you factored in your UK personal allowance?

Key point to remember with foreign income is that Australian tax is not deducted at source, so you do get a bill all at once which can be nasty if you have not prepared for it. The ATO will probably put you on instalments for future tax years to stop the same thing happening again.

Nicstids

Hi Gary,

Would probably be a good idea to look at salary packaging - I think in the ADF you'll be able to package a car and maybe additional super contributions? I think the ADF use Smart Salary http://www.smartsalary.com.au/

Definitely worth a look if you're in the higher income bracket.

colinmorgan

Hi JAJ,

My pension and UK rental income is paid into my UK account to cover mortgage etc. etc.

My personal allowance may be part of the problem. I am using my personal allowance in the UK which naturally limits the amount of tax paid in the UK. As far as I am aware my UK allowance is not used in the Oz calculation.

Hopefully you will correct me.

Cheers

Colin

Nicstids

JAJ is right about instalments - we are paying the tax on my hubby's Forces pension for 2006/2007 by instalments based on his tax bill for 2005/2006.

colinmorgan

I would prefer to pay by instalments and have no doubt will be asked to - Isn't life easy with hindsight.

I am now dreading submitting my 06-07 return!! Luckily the rates have dropped for 06-07, which should make it slightly less painful.

Colin