Zig Zag Wanderer

I'm already a UK expat, living in Australia. Wanting to avoid taxes, I'm thinking of leaving Australia too.

Has anyone done this, and had any difficulty getting the ato to accept non tax residency? I understand they are very reluctant to remove their grubby hands from your wallet...

Beoz

If you leave Oz and have no sources of Australian income you no longer pay tax in Australia, whether they accept it or not.

Zig Zag Wanderer

Not true, I'm afraid.

The ato will require tax paid on all worldwide income if they Regard you as resident for tax purposes.

​​They do not allow you to be non resident unless they agree. There are no fixed rules, they determine case by case.

spouse of scouse

My husband (dual Brit/Australian citizen) and myself (Australian) had no problem at all with the ATO. While we lived in the UK I filed an ATO tax return solely due to interest on my Oz bank account, was not required to report my worldwide income. Husband had no Australian income so didn't file at all. At no stage were we asked to prove we were non-resident for Australia tax purposes.

On our return to Australia in August 2018 we just filed our ATO returns in July 2019, noting that we'd only returned to live in Australia from August 2018 and only calculating our tax from that date. Again, no questions were asked and our returns were processed as usual.

As long as you meet the ATO's 'non resident' rules, you won't have a problem. There's no discretion used, you either meet the definition of non-resident for tax purposes or you don't.

Zig Zag Wanderer

That's good to know, many thanks.

Although the residence rules are, quite deliberately, open to interpretation by the ato (the 'normally resident' 3rd condition), it is good to know that they don't exercise this by default.

the troubadour

The rules are simple. Income earned tax will be required to be paid somewhere. At the moment being resident in Australia pay tax in two countries on passive earnings and rental income. This information is declared to ATO through my accountant. I would only send information to ATO if living out of Australia is was earning an income in some form.
If as on previous occasion, leave Australia to either work or live on accumulated sources of income would only declare tax in that/those particular countries. Also when I declare overseas income, I include obviously deductions from source in declaration. Remember all information is passed on these days to country of residence.

Zig Zag Wanderer

Unfortunately the rules are not as simple as they seem. People have been resident outside of Australia for years, and the ato had still demanded tax on their foreign income.

Tax on income in Australia is fine, obviously. Tax in your current country of residence (which is also open to interpretation) is fine. Tax on your foreign income when you are not living in Australia is not, yet the ato interpret the rules to give them the right to do it. The rule, particularly regarding residence, is deliberately vague for this purpose.

If you don't believe me, as some here seem not to, look up the court cases cited by several articles on the matter.

The UK has strict rules that are not open to interpretation. I can spend up to 90 days a year without becoming resident for tax, or only 45 if I've been resident for tax in any of the previous 3 years. Australian rules are not so clear, which is why I'm asking this question.

Beoz

Can you provide links?

When I live in the UK, the ATO doesn't give 2 hoots about me if I have no earnings in Australia - so wrap up any interest earning bank accounts, investment properties, etc before you go.

Zig Zag Wanderer

https://www.ato.gov.au/Business/Inte...ign-residents/
This states that "As a foreign resident, you must lodge a tax return in Australia."

On that page there is a link :
https://www.ato.gov.au/Individuals/I...tax-residency/
This outlines the rules, pertinent ones are :
"Resides test
The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and you don't need to apply any of the other residency tests.

Some of the factors that can be used to determine residency status include:

physical presence
intention and purpose
family
business or employment ties
maintenance and location of assets
social and living arrangements.
If you don't satisfy the 'resides test', you'll still be considered an Australian resident if you satisfy one of three statutory tests.

Domicile test
You're an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

A domicile is a place that is considered to be your permanent home by law. For example, it may be a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

A permanent place of abode should have a degree of permanence and can be contrasted with a temporary or transitory place of abode.

183-day test
This test only applies to individuals arriving in Australia. You will be a resident under this test if you're actually present in Australia for more than half the income year, whether continuously or with breaks.

You may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here. If you have already taken up residence in Australia, this test will not generally apply regardless of the number of days you spend overseas."

Effectively, the onus is on you to demonstrate that you are a resident of another country. Travelling or temporary accommodation, even long term keases, may not be enough. It's up to the ato, or courts if you appeal.

Particular case:
ZKBN and Commissioner of Taxation [2013] AATA 604 (27 August 2013)

There was another one less ambiguous, where the defendant was refused on appeal because he did not have a permanent place of residence while working abroad for over a year. I'll try to find it.

Zig Zag Wanderer

https://nomadcapitalist.com/2019/08/...owhere-harder/
"This is an issue for citizens of numerous countries who were once residents of their home country but left to explore the world while making a living. I mainly work with folks from English-speaking countries like Australia, Canada ,New Zealand, the UK, Ireland, and others, but this is also happening in other EU countries and even in some odd places like Colombia.

Many folks from these countries did not believe that they owed any taxes. But as more and more people have made the jump to a nomadic lifestyle, governments have paid more attention and these folks are now hearing from them. Because they never met all of the requirements to become a tax non-resident in their home country, they now owe thousands in back taxes.

They did not realize that leaving their home country was not enough to avoid paying tax.

This is the nomad tax trap!"

My main problem will be that all home will be from a foreign investment source, and I want to travel extensively, not staying anywhere more than a couple of months. In that case, I have to pay the ato.

Another case
https://www.expattaxes.com.au/15-way...idency-status/

https://www.ato.gov.au/law/view/docu.../NAT/ATO/00001

My situation is further complicated for several personal family reasons, so I want to find out if the ato will follow this up.

I also need to establish a tax residency elsewhere, because the payments from my investment will be required to be reported (quite rightly) to my country of residence, and I don't think they will accept 'none' as an answer.

Theoretically, I could go back to the UK, establish residence, then become an expat from there (again), but it limits the time I can spend in the uk for 3 years.

Beoz

Well you have sources of income. There is the challenge.

Zig Zag Wanderer

If I had no income, I'd have a lot more important things to worry about than the taxman chasing me, yes!