The Taxation of Aussie Expats & Construction Expats
(Article provided by Go Matilda tax consultancy)
The Section 23AG Changes
In the 2009 Federal Budget the Australian Government announced a significant change to the tax treatment of income earned by Australian resident individuals who are working overseas in a variety of occupation including the building & civil engineering construction industry, effective from the 2009/10 tax year.
Up to that time income earned by individuals working outside Australia for a period of at least 91 days was exempt from the charge to income tax in Australia, irrespective of the rate of overseas tax suffered on that income.
The amendment requires all Australian residents – save for those employed in a limited number of occupations - who are working outside Australia to include the income earned from that employment in their assessable income when completing an Australian tax return.
A foreign tax offset is available for any local taxes that have been suffered on that same income.
Importantly, these changes do not affect any individuals who are no longer tax residents of Australia – we recommend that individuals who are living and working outside Australia for an extended period of 2 years or more should review their residency status as becoming non resident may result in overseas earned income ceasing to be taxable in Australia.
In this regard a “usual place of abode” outside Australia is likely to be a key issue.
Additional tax compliance costs are probable for taxpayers working outside Australia, and affect a wide body of people, including overseas based executives and Gap Year students on working holidays outside Australia.
Individuals contemplating a claim of non residence should remember that non residents of Australia are subject to Australian tax on their Australian source income and capital gains, at significantly higher rates of tax than apply to Australian residents.
Rather, it is recommended that claims for deductible expenditure are reviewed, and consideration given to issues such salary packaging- eg Living Away From Home Allowance, and additional superannuation contributions.
Where private health insurance is not being maintained, those whose income triggers a liability to the Medicare Levy Surcharge might consider taking out suitable private health cover.
Employers should also consider whether they have additional PAYG Withholding obligations arising as a result of the withdrawal of the overseas earnings exemption.
Go Matilda Tax is a tax consultancy that specialises in assisting individuals and businesses that have an international aspect to their affairs.
They have offices in Australia and overseas, and can be contacted at firstname.lastname@example.org, or through any of the telephone numbers shown on their website, www.gmtax.com.au