Go Back  British Expats > Living & Moving Abroad > Australia
Reload this Page >

tax on money in an australian account

tax on money in an australian account

Old May 6th 2002, 2:27 pm
  #1  
Forum Regular
Thread Starter
 
Joined: Apr 2002
Location: UK
Posts: 83
laurash is an unknown quantity at this point
Default tax on money in an australian account

Does anyone know how I would be taxed on money in an Australian deposit account while I am still resident in England?
Thanks for any help.
laurash is offline  
Old May 6th 2002, 7:43 pm
  #2  
Just Joined
 
Joined: Mar 2002
Posts: 4
Sardarji is an unknown quantity at this point
Default Re: tax on money in an australian account

needs to file taxes on the interest you receive from your funds in Australia. If you do not give them your Tax File number, then the banks usually take 47% of the interest you receive.

If you claim that you are an UK resident at the time of filing your taxes, you can most likely get a refund from the Tax office.

Regards

Sardarji
Sardarji is offline  
Old May 7th 2002, 1:00 am
  #3  
Alan Collett
Guest
 
Posts: n/a
Default Re: tax on money in an australian account

Errr, no that's not correct ....

If you are resident in the UK you will have tax withheld at the rate of 10% on any
interest received from monies deposited in an Australian bank account under the
provisions of the UK-Australia Tax Treaty.

Alan C www.collettandco.com

Sardarji wrote in message <[email protected]>... needs to file taxes on
the interest you receive from your funds in Australia. If you do not give them your
Tax File number, then the banks usually take 47% of the interest you receive.

If you claim that you are an UK resident at the time of filing your taxes, you can
most likely get a refund from the Tax office.

Regards

Sardarji

--
Posted via http://britishexpats.com
 
Old May 7th 2002, 3:00 pm
  #4  
Michael Morahan
Guest
 
Posts: n/a
Default Re: tax on money in an australian account

"Alan Collett" <[email protected]> wrote in message
news:<[email protected]>...
    > Errr, no that's not correct ....
    >
    > If you are resident in the UK you will have tax withheld at the rate of 10% on any
    > interest received from monies deposited in an Australian bank account under the
    > provisions of the UK-Australia Tax Treaty.
    >

That's interesting. If I don't plan to emigrate for six months, but have a lot of
cash, say from a house sale, can I invest the lot in a Australian bank account and
only pay 10% interest until I actually emigrate, whereas in the UK I would be taxed
at a much higher rate? If so, it makes sense to transfer as much money as you can to
an Australian account rather than leaving it in your home country. Doesn't it?
 
Old May 7th 2002, 4:07 pm
  #5  
Banned
 
newstartnz's Avatar
 
Joined: Mar 2002
Posts: 756
newstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the rough
Default Re: tax on money in an australian account

Not quite so easy, you are legally liable to pay tax in the country in which you are tax resident - it doesn't matter too much where the money is deposited. Plus some countries don't have a tax agreement with the UK so you could end up paying tax twice, once in the country where you are tax resident, once where the money is deposited.

Maybe you'd be better off depositing the money in a taxfree offshore bank (say, Jersey) because then, legally, you'd be liable (if a UK tax resident) only to pay tax on interest when you bring that interest into the UK. If you never did bring the interest into the UK, I believe you'd never be legally liable for tax on that interest in the UK. (You might spend the interest on holiday in Greece, for example.)
newstartnz is offline  
Old May 7th 2002, 10:30 pm
  #6  
Tony Bryer
Guest
 
Posts: n/a
Default Re: tax on money in an australian account

In article <[email protected]>, Alan Collett wrote:
    > If you are resident in the UK you will have tax withheld at the rate of 10% on any
    > interest received from monies deposited in an Australian bank account under the
    > provisions of the UK-Australia Tax Treaty.

But I presume you can offset that against the UK tax due ???

--
Tony Bryer
 
Old May 8th 2002, 12:00 am
  #7  
Tony Bryer
Guest
 
Posts: n/a
Default Re: tax on money in an australian account

In article <[email protected]>, Alan Collett wrote:
    > If you are resident in the UK you will have tax withheld at the rate of 10% on any
    > interest received from monies deposited in an Australian bank account under the
    > provisions of the UK-Australia Tax Treaty.

Is this offset against the UK tax you have to pay if you are a UK taxpayer? I am in
this position for the first time this year.
--
Tony Bryer UK
 
Old May 8th 2002, 1:00 am
  #8  
Alan Collett
Guest
 
Posts: n/a
Default Re: tax on money in an australian account

Re your first paragraph - the absence of a Tax Treaty doesn't necessarily mean you
don't receive credit for tax suffered in another jurisdiction - the UK does give
unilateral relief for taxes suffered overseas in many circumstances.

Re the second paragraph - NO! Interest income from outside the UK IS subject to UK
income tax if you are UK resident and UK domiciled - which most people in the UK are.
Don't think that by putting your money in an offshore account you are not liable to
UK tax, because if you live in the UK you will probably be evading tax by not
declaring the interest on a UK Tax Return.

Alan C www.collettandco.com

newstartnz wrote in message <[email protected]>... Not quite so easy, you
are legally liable to pay tax in the country in which you are tax resident - it
doesn't matter too much where the money is deposited. Plus some countries don't have
a tax agreement with the UK so you could end up paying tax twice, once in the country
where you are tax resident, once where the money is deposited.

Maybe you'd be better off depositing the money in a taxfree offshore bank (say,
Jersey) because then, legally, you'd be liable (if a UK tax resident) only to pay tax
on interest when you bring that interest into the UK. If you never did bring the
interest into the UK, I believe you'd never be legally liable for tax on that
interest in the UK. (You might spend the interest on holiday in Greece, for example.)

--
Posted via http://britishexpats.com
 
Old May 8th 2002, 1:00 am
  #9  
Alan Collett
Guest
 
Posts: n/a
Default Re: tax on money in an australian account

Correct.

Alan C www.collettandco.com

Tony Bryer wrote in message ... In article <[email protected]>, Alan
Collett wrote:
    > If you are resident in the UK you will have tax withheld at the rate of 10% on any
    > interest received from monies deposited in an Australian bank account under the
    > provisions of the UK-Australia Tax Treaty.

But I presume you can offset that against the UK tax due ???

--
Tony Bryer
 
Old May 8th 2002, 6:23 am
  #10  
Banned
 
newstartnz's Avatar
 
Joined: Mar 2002
Posts: 756
newstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the rough
Default Re: tax on money in an australian account

Alan, re part 2 of yor reply - you are correct but do not give the whole answer, because your 'cashflow paid to IR' liability to pay tax on interest income only begins when you bring the interest income into the UK, ie by not bringing the interest into the UK you can defer liability.

Alan collett wrote in reply: Re your first paragraph - the absence of a Tax Treaty doesn't necessarily mean you
don't receive credit for tax suffered in another jurisdiction - the UK does give
unilateral relief for taxes suffered overseas in many circumstances.

Re the second paragraph - NO! Interest income from outside the UK IS subject to UK
income tax if you are UK resident and UK domiciled - which most people in the UK are.
Don't think that by putting your money in an offshore account you are not liable to
UK tax, because if you live in the UK you will probably be evading tax by not
declaring the interest on a UK Tax Return.

Alan C www.collettandco.com

newstartnz wrote in message <[email protected]>... Not quite so easy, you
are legally liable to pay tax in the country in which you are tax resident - it
doesn't matter too much where the money is deposited. Plus some countries don't have
a tax agreement with the UK so you could end up paying tax twice, once in the country
where you are tax resident, once where the money is deposited.

Maybe you'd be better off depositing the money in a taxfree offshore bank (say,
Jersey) because then, legally, you'd be liable (if a UK tax resident) only to pay tax
on interest when you bring that interest into the UK. If you never did bring the
interest into the UK, I believe you'd never be legally liable for tax on that
interest in the UK. (You might spend the interest on holiday in Greece, for example.)
newstartnz is offline  
Old May 8th 2002, 8:18 am
  #11  
Banned
 
newstartnz's Avatar
 
Joined: Mar 2002
Posts: 756
newstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the rough
Default Re: tax on money in an australian account

Alan,

I'm not a tax expert and would never advocate illegally evading tax liability. But I believe my replies above to be correct and an indication of how tax planning (and the timintg of tax liability) can help you manage your finances, cashflow etc.

I believe you, Alan, have some good tax expertise, perhaps we could expand the scenario.

Say person A sells his UK house, deposits the cash offshore for 6 months. Then 6 months after the sale he goes to Aus and moves the money (capital plus interest) to Aus in readiness for a new house purchase. Where is he liable to pay tax on the interest received? (I have had expert advice in the past that a UK resident is not liable to pay tax on interest earned offshore until that interest is repatriated to th UK. But what if he becomes tax resident in Aus and repatriates the money to that second country - having earned the interest income before he became tax resident in Aus?)
newstartnz is offline  
Old May 8th 2002, 10:19 am
  #12  
Migration Agent
 
Joined: May 2002
Location: Offices in Melbourne, Brisbane, Perth, Geelong (Australia), and Southampton (UK)
Posts: 6,405
Alan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond repute
Default Re: tax on money in an australian account

Hi newstart.

I'm sorry but I have to disagree with what I think you and your "expert" are suggesting. In your example if the interest is credited to the taxpayer's offshore bank account when he/she is resident and domiciled in the UK the interest will be taxable in the UK. Save for the case where the individual is not domiciled in the UK it is most definitely NOT the case that the interest has to be remitted to the UK before it becomes taxable.

Have a look at Inland Revenue booklet IR 20 if you want to check this, which says:

6.2 If you are resident in the UK, you will normally pay UK tax on all your investment income, wherever it arises. The remittance basis will apply to overseas investment income (other than investment income arising in the Republic of Ireland) if you are

resident but not domiciled in the UK, or
resident but not ordinarily resident in the UK, and either a Commonwealth citizen (this includes a British citizen) or a citizen of the Republic of Ireland.

Booklet IR20 can be accessed via this link:
http://www.inlandrevenue.gov.uk/pdfs/ir20.htm

Given that the taxpayer moves to live in Australia and becomes tax resident there any interest credited after his/her arrival in Australia will then be taxable there.

Does this clarify the position?


Alan C

Originally posted by newstartnz
Alan,

I'm not a tax expert and would never advocate illegally evading tax liability. But I believe my replies above to be correct and an indication of how tax planning (and the timintg of tax liability) can help you manage your finances, cashflow etc.

I believe you, Alan, have some good tax expertise, perhaps we could expand the scenario.

Say person A sells his UK house, deposits the cash offshore for 6 months. Then 6 months after the sale he goes to Aus and moves the money (capital plus interest) to Aus in readiness for a new house purchase. Where is he liable to pay tax on the interest received? (I have had expert advice in the past that a UK resident is not liable to pay tax on interest earned offshore until that interest is repatriated to th UK. But what if he becomes tax resident in Aus and repatriates the money to that second country - having earned the interest income before he became tax resident in Aus?)
Alan Collett is offline  
Old May 8th 2002, 1:04 pm
  #13  
Banned
 
newstartnz's Avatar
 
Joined: Mar 2002
Posts: 756
newstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the rough
Default Re: tax on money in an australian account

Alan,

You missed out the most important part of the link you posted:

'Where the remittance basis applies, you are liable to UK tax on the amount of your overseas investment income that is remitted to the UK. Income is remitted if it is paid here or transmitted or brought to the UK in any way. In working out your tax liability, we include all income remitted to the UK. '

Your link was helpful and booklet IR20 can be accessed via this link:
http://www.inlandrevenue.gov.uk/pdfs/ir20.htm
- see 6.2.

So I humbly stand my original replies, that if you do not repatriate or remit the interest income to the UK, you are not, as a UK resident, liable to tax on that interest income. Which is also the tax advice I have seen from 'big 4' accountancy tax experts.

Which still leaves the question - if you spend the interest income elsewhere (ie not UK), where are you liable to pay tax on it?

Plus my earlier question therefore remains unanswered (Say person A sells his UK house, deposits the cash offshore for 6 months. Then 6 months after the sale he goes to Aus and moves the money (capital plus interest) to Aus in readiness for a new house purchase. Where is he liable to pay tax on the interest received? (I have had expert advice in the past that a UK resident is not liable to pay tax on interest earned offshore until that interest is repatriated to th UK. But what if he becomes tax resident in Aus and repatriates the money to that second country - having earned the interest income before he became tax resident in Aus?))
newstartnz is offline  
Old May 8th 2002, 1:42 pm
  #14  
Migration Agent
 
Joined: May 2002
Location: Offices in Melbourne, Brisbane, Perth, Geelong (Australia), and Southampton (UK)
Posts: 6,405
Alan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond reputeAlan Collett has a reputation beyond repute
Default Re: tax on money in an australian account

The reason I didn't post the second paragraph is because the remittance basis does NOT apply if you are domiciled and resident in the UK, as most people are who live in the UK and are anticipating moving overseas - read the whole paragraph from IR 20, which I repeat below for reference:

"6.2 If you are resident in the UK, you will normally pay UK tax on all your investment income, wherever it arises. The remittance basis will apply to overseas investment income (other than investment income arising in the Republic of Ireland) if you are

resident but not domiciled in the UK, or
resident but not ordinarily resident in the UK, and either a Commonwealth citizen (this includes a British citizen) or a citizen of the Republic of Ireland.

Where the remittance basis applies, you are liable to UK tax on the amount of your overseas investment income that is remitted to the UK. Income is remitted if it is paid here or transmitted or brought to the UK in any way. In working out your tax liability, we include all income remitted to the UK. "

Also, take a look at the table beneath para 6.24 in booklet IR20 to see that if you are resident, ordinarily resident, and domciled in the UK you are liable to UK tax on investment income arising outside the UK.

If the experts from the big 4 accountancy firms are telling you something to the contrary (which I would have to doubt) then they are wrong.

As such:

1. It is irrelevant where you spend the interest - it is taxable in the UK whenever and wherever it arises if you are resident and domiciled in the UK.

2. In answer to your question as to selling your house, lodging funds offshore, etc. Given that the taxpayer is domiciled and resident in the UK prior to leaving the UK interest arising before he/she leaves will be taxable in the UK, and that which arises after he/she arrives in Australia will be assessable there.

Are you clear as to the issue of domicile - as this is the key aspect that affects whether interest arising offshore is assessable in the UK on a remittance or arising basis.



Alan C

Originally posted by newstartnz
Alan,

You missed out the most important part of the link you posted:

'Where the remittance basis applies, you are liable to UK tax on the amount of your overseas investment income that is remitted to the UK. Income is remitted if it is paid here or transmitted or brought to the UK in any way. In working out your tax liability, we include all income remitted to the UK. '

Your link was helpful and booklet IR20 can be accessed via this link:
http://www.inlandrevenue.gov.uk/pdfs/ir20.htm
- see 6.2.

So I humbly stand my original replies, that if you do not repatriate or remit the interest income to the UK, you are not, as a UK resident, liable to tax on that interest income. Which is also the tax advice I have seen from 'big 4' accountancy tax experts.

Which still leaves the question - if you spend the interest income elsewhere (ie not UK), where are you liable to pay tax on it?

Plus my earlier question therefore remains unanswered (Say person A sells his UK house, deposits the cash offshore for 6 months. Then 6 months after the sale he goes to Aus and moves the money (capital plus interest) to Aus in readiness for a new house purchase. Where is he liable to pay tax on the interest received? (I have had expert advice in the past that a UK resident is not liable to pay tax on interest earned offshore until that interest is repatriated to th UK. But what if he becomes tax resident in Aus and repatriates the money to that second country - having earned the interest income before he became tax resident in Aus?))

Last edited by Alan Collett; May 8th 2002 at 1:59 pm.
Alan Collett is offline  
Old May 8th 2002, 2:47 pm
  #15  
Banned
 
newstartnz's Avatar
 
Joined: Mar 2002
Posts: 756
newstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the roughnewstartnz is a jewel in the rough
Default Re: tax on money in an australian account

Alan, I bow to your tax expertise...

Sorry if I am dragging this out, but I did say I am not a tax expert.
So, if you earn interest in your offshore account and are UK tax resident, must you declare it in your tax return for the year it is earned? Or when you remit it to the UK?

Why do many UK residents deposit money in offshore interest free deposit accounts if it is not legal to defer tax liability until the money is remitted to the UK? The interest rates often seem inferior to those obtainable in the UK.

IR20 6.2 does not actually mention WHEN the tax becomes liable to be paid and the advice I have seen says that liability may be deferred.

I understand the thorny domicile issue.

Thanks.
newstartnz is offline  

Contact Us Archive Advertising Cookie Policy Privacy Statement Terms of Service

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.