AlliF

Hi, was wondering if anybody had knowledge of the tax laws surrounding working away on a secondment and selling your house in Australia and could help please.

We have had our house on the market for a couple of weeks now (probably going to take a few months to sell at least) but are in the middle of finalising a proposal for hubby to get an inter company transfer visa temporarily to work in Canada & UK for about a year They want him over there urgently and I can't get a visa just now so under the proposal I will be moving back to the UK and staying with relatives who can help out with our toddler and husband will be going between UK and Canada.

I'm not sure if we are still classed as Australian resident for tax purposes because he is still employed by Australian branch of his company?
If we sell the house in Australia whilst we are away will we still get the CGT exemption on any profits we make on the house sale as it has been our main residence since we built it 3yrs ago? We certainly wouldn't be buying another property elsewhere or setting up permanent home in the meantime and will just be staying with relatives.

If he enjoys the secondment (and if I can get a visa) it has the potential to turn into an emigration to Canada but we are talking after about a year.

Any advice greatly appreciated.

ABCD......

From my reading of "Leaving Australia - what you need to know"
http://www.ato.gov.au/content/64045.htm

I think you will be OK under the "Main residence exemption" for at least 6 years.

ABCD......

You may however be classed as a foreign resident and need to lodge annual Australian income tax returns for income from sources in Australia.
In this case, you will be subject to income tax at foreign resident rates. There is no tax-free threshold.

Determination of residency status tool – leaving Australia
http://calculators.ato.gov.au/script...ving.xr4&go=ok

AlliF

Thanks ABCD, I think we fall under the resident for tax purposes as we will not be permanently in any one location.
We won't be shipping our stuff anywhere, its all going to have to be stored and at the end of the secondment we would have to return if we don't get a visa.
It is a bit confusing though.
Don't want to be stung for a heap of tax unnecessarily.

JAJ

What's your status in Australia? Are you Australian citizens, permanent residents, NZ citizens or other temporary status?

AlliF

We are all citizens, my daughter having been born here and my husband and I becoming citizens 2011. We have been here 6 1/2 years now & haven't lived anywhere else in that time.

Fardell

Generally speaking you are probably going to continue being considered as tax residents of Australia - as a rule of thumb (determining residency can be very complicated) the ATO will consider you non-resident if you intend to move overseas for a period of 2 years or longer and establish an abode (i.e. a home). Look at ruling IT2650 for the main considerations - the tax residency tools on the ATO should be discontinued; they are dangerously general.

I concur with the view expressed re your home - the CGT exemption for a main residence persists for a period of 6 years if you rent it out and forever if you don't.

In general that means that you will need to submit an Australian tax return even whilst away and include your overseas income - but you will get an offset for overseas tax paid. Therefore no double tax and you won't be taxed at non-resident rates.

AlliF

Thanks Fardell, Totally agree re the tax residency tools. Had a look at the rulings in comparison- not clear cut at all, almost seems as if they make up their minds dependant on how they feel that day

Hubby phoned the ATO y'day and they were worse than useless - just said do the test and that is the answer, but when you do the self-determination test it states that it is general and ATO are not bound by it.

Going to see a tax accountant and make sure we avoid anything that would make us classed as foreign residents - not only would we cop it for the CGT we would also be 10k worse off because of the no tax-free threshold
We will not be earning any foreign income outside of Australia so I refuse to be worse off!

JAJ

Your husband's company should be paying for you to get appropriate tax advice in both Australia and Canada.

Note that even if you remain Australia tax resident, you will probably also become tax resident in Canada. As a result, you will have two countries taxing you on worldwide income/capital gains. While tax treaties and foreign tax credits can eliminate most issues, there is still a risk of double taxation. There may be opportunities for tax planning before you leave Australia.

Fardell

Totally agree regarding access to professional tax advice; unfortunately most companies do not provide access to advice, and just pay for the completion of tax returns, which is next to useless. Your husband will be dual tax resident in Canada and Australia - if your husband/company contemplates making contributions to a pension plan in Canada because it is tax efficient (such as an RRSP) just remember that a 15% withholding tax will apply on any transfer to Australia.

AlliF

Seriously? Even if he is still employed by the Australian part of company, only paid by them, and is staying in hotels whilst working there for very short periods of time (i.e. a couple of weeks at a time) and hasn't got a permanent visa? (he is going on an intercompany transfer one)
Beginning to think he should tell them to stuff it.
We have someone from their HR in Canada calling this evening - may ask them to foot the bill for tax advice if they don't have someone in-house to do it.
We only have about a month before we are due to go too.

Fardell

Yes. Even if he doesn't meet the normal residency criteria he may be "deemed tax resident for tax purposes" - see the reference below. It is very like the Australian "183 day rule":

http://www.cra-arc.gc.ca/tx/nnrsdnts.../nnrs-eng.html

I am not sure I would say "stuff it" to HR I did these types of jobs for years and as long as it is financially worthwhile, the company guarantees your net tax position and it is alright from a family position, why not? Just get them to stump up for the tax advice either end.

AlliF

I think he's in the clear for the deemed tax resident as he won't be there for over 183 days/will be resident for tax purposes elsewhere (hopefully) and he isn't in the categories of government employees etc detailed there.

The problem is I don't think he will be getting a whole heap more money - we just didn't know what the tax implications where before we agreed to this. And he's useless at negotiating/asking for more cash.

I think as you say we will need to stipulate to them that he needs to be guaranteed to not be worse off, especially given the inconvenience this is going to cause.

Fardell

My rule of thumb used to be a minimum net salary increase of an extra 20% in cases like this (developed to developed environements); 30% plus for a non-English speaking environment (with a few exceptions) and a lot more for anywhere in Africa except SA. Otherwise, not worthwhile from a family perspective unless you are going to be learning something very useful, in which case you make allowances

Jacqui

We are in a similar position currently. Definitely get it looked at by a tax accountant, I think your husband's company should organise this - especially as they are asking for him to move there "urgently" to help the company out! You shouldn't have this to deal with, on top of selling your house and everything else involved.

My husband has been seconded to the UK, same thing, he was needed urgently or else the contract could fall through, it was hard for him to say "no" really, despite the fact that, as he reminded them, we left the UK with no intentions of returning, hmmm. He's gone by himself, because the kids are at uni and it would be too disruptive, and anyway I don't want to go back, we've been here 11 years now, this is my home.

The tax thing is all very complicated. We went through the online rule IT2650 and thought it would be ok as the secondment was for less than 2 years and me and the kids are still here in the family home, and our own tax advisor thought he would be Australian resident too. He gets paid by an Australian company in $ into our Australian bank account and the money never actually makes it to the UK (it gets spent here on our mortgage and bills). HMRC thought otherwise. Hubby spoke to a tax advisor at work, and it has taken a year for Ernst and Young to sort it out. Two returns have been filed (one for each country) and the underpaid tax paid for by his company (phew!). He's had to fill in loads of forms, he's had interviews with tax agents from the Australian and UK branches, a long-winded online tax form to fill in with a calendar on which he has to record where he is and what he does every single day (including weekends), along with information about me and my income, all our assets, location of bank accounts and just about anything else that might make a difference to his residency status. He's been deemed a UK resident but not ordinarily resident, so his income is classed as "foreign source" and taxed somewhat higher.

If you thought the emigration paperwork was complicated, you don't even want to see the tax paperwork! And you don't want to risk making any mistakes which could cost you dearly $$. Your husband should insist, if they want him to move abroad, they should provide (and pay for) the tax advice. In fact he shouldn't have to ask, HR should be organising it for him anyway. My husband has found this whole tax business a big headache, on top of the stress of the job itself (very long hours), having to live back in the UK when he was actually quite settled here, as well as all the jetlag from flying back and forth every 8 weeks to see us. Will be glad when the secondment is over.