How Does An Aussie Expat Qualify As A Resident Vs A Non Resident For Tax Purposes

G'day, expats. Last week we spoke about the complexities of determining whether you classify as a resident or non-resident for tax purposes. In this week's video, we wanted to run through how the applicable tax rates apply to those expats who qualify as a non-resident. First of all, let's look at the types of income that you have to declare on your Australian tax return when you're classified as a non-resident. They are Australian employment income, Australian rental income, Australian pensions and annuities, and capital gains that you may have accrued on Australian real property. This excludes shares and managed funds. You may also need to start lodging your tax return due to the newly implemented changes with respect to the HECS, HELP and TSL Debt regime that expats have to fall under. Now that we know what income you have to declare, how do the tax rates differ from a resident versus a non-resident? The first major difference is that non-residents are not eligible for the tax-free threshold. When you're an Australian resident, you can earn up to $18,000 and not pay any tax at all. Unfortunately, for non-residents the tax rate of 32.5 cents kicks in on the first dollar you earn and goes all the way up to $87,000 per year. Then for every dollar you earn over $87,000 per year, you pay 37% on the dollar up to $180,000 per year. Then over $180,000 per year, you pay 45 cents on the dollar. All Australian sourced interest, unfranked dividends and royalties derived after you cease to be Australian tax resident, submit to withholding tax provisions. Withholding tax rates are considered to be the final tax you'll pay on the income that is sourced and the actual provider of that revenue, will you directly remit that tax direct to the ATO. Specially, 10% of any credit interest earned on a bank account is deducted from that credit and paid directly to the ATO on your behalf. 15% of dividend income that is accrued through shares or managed funds where you reside in a country with a double taxation agreement is deducted from those dividends. If you reside in a country that doesn't have a double taxation agreement, then that rate jumps to 30%. Royalties are taxed up to 30% all depending on whether you reside in a country that has a double taxation agreement or not. This list is not definitive and certain exceptions do exist. If you do have investments or bank accounts, you do need to notify the financial institution or company of your non-residency status. If you don't do this and you don't declare your tax-full-number then it is possible that you may be taxed at rate of 45%. As withholding tax is deducted before receipt of that money, therefore this income does not need to disclose on an Australian tax return. Therefore, there is no benefit of negative gearing these types of assets because there are no claims to be made because the tax is taxed at source rather than after any of the deductions. Please note that there is no tax withheld on income that has attaching franking credits as the company has paid tax on your behalf. One last point that we would like to comment on is that when you're paying tax as a non-resident, you are not subject to the Medicare levy. Now that may be seen as a good thing, but we have heard of a case in the past where expats do come back to Australia and utilise those services and make claims on the Medicare service. Because you are not paying the Medicare levy, you are not entitled to that service. Atlas Wealth Management is a specialist in providing financial planning to Australian expatriates. To find out more about Atlas Wealth Management and how we can help Australian expats please go to www.atlaswealth.com.au. Make sure you connect with us on our respective social media channels: Facebook: www.facebook.com/atlaswealthmgmt Twitter: www.twitter.com/atlaswealthmgmt Instagram: www.instagram.com/atlaswealthmgmt