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Australian working in Singapore - Income Tax issues

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livingthedream
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Australian working in Singapore - Income Tax issues

Postby livingthedream » Sun, 13 Feb 2011 11:36 am

Hi All

I am an Australian who is about to take a job in Singapore for a German company. It will be a min 2yr contract

I am trying to work through the tax side of things and am hoping you can help.

Tax rate in Singapore is about 15%. However i am reading that Australia now charges expats Aust income tax still but will give you a crefit for your paid singapore income tax. Is this correct? Is this only if i stay an Aust Perm resident? Obviosuly i would like to not pay Aust tax given its about double Singapore.

I also own a property in Australia that we currently live in. We were just going to rent it out whilst we were in Singpapore. Obviosuly we cant claim or negative gear it given we arent paying Aust tax (or so i hope)

Am i better of renouncing my PR status in Australia and taking up Singapore PR status?

Any assistance would be appreciated from those that have done same move.

Cheers
LTD

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Postby Mad Scientist » Sun, 13 Feb 2011 12:31 pm

Are you an Ozzie PR or an Ozzie. Your statement is as confuse as hell
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Postby sundaymorningstaple » Sun, 13 Feb 2011 1:01 pm

I am an Australian who is about to take a job in Singapore for a German company.


Am i better of renouncing my PR status in Australia


Which is it? :???:

livingthedream
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Postby livingthedream » Sun, 13 Feb 2011 2:03 pm

Sorry I am Australian.

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Postby Mad Scientist » Sun, 13 Feb 2011 3:22 pm

Have you gone to ato website

http://www.ato.gov.au/individuals/conte ... 2&st=&cy=1

and this

http://www.iras.gov.sg/irasHome/page.aspx?id=812

Do not talk about PR as it is not within your reach. It is very difficult right now.

Understand the above than ask me again what you looking for
The positive thinker sees the invisible, feels the intangible, and achieves the impossible.Yahoo !!!

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Postby aster » Sun, 13 Feb 2011 10:02 pm

If you move abroad then I don't see why you couldn't be non-resident for Australian tax purposes. Not sure how the property plays into this, nor the fact that you are on a 2-yr contract. In some countries either of those issues could lead to you being regarded as temporarily away from home. :)

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Postby livingthedream » Mon, 14 Feb 2011 7:55 am

Thanks for the links, they were a little more useful than the ones i had seen on the ato website. Reading those it would appear i wont be subject to Aus income tax.

OK i should calrify some more on the contract. Its not a 2yr contract, but it has a penalty clause if i leave before 2yrs, so basically i will stay for a minimum 2yrs to avoid any penalties imposed by the copmany

yes the property makes it interesting again but from what ive read as i ahve lived in it as a primary residence for more than 12 months, i can rent it for up to 6 yrs without it becoming subject to CGT. However as i am not submitting a tax assesment in australia i cant have the property geared eg. get tax back.

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Postby Nath21 » Mon, 14 Feb 2011 8:33 am

First issue is are you non resident or resident for tax purposes. You want to be non-resident for tax purposes and their are steps to help you achieve this. Most people beleive that if thay are overseas for 2 years they are fine but that is not true.

There are three main rules to determine residency - I have listed below.

Be careful on the 183 day rule, its not the only rule just the major one. For instance if I worked in Singapore for over 183 days but my family stayed in australia in our house I would be treated as an australian tax resident regardless of the 183 days spent overseas. You must have the intention to exiting australia. There is a whole raft of measures you need to do and should do to make sure your not caught ion a tax audit. Firstly if you are working overseas for 183 days and taking the family away, its best to take yourself of the electerol role, inform your bank to take withholding tax of your interest earnings (applies to non tax residents), you also have implied asset disposl for cgt purpose on your austrlian assets such as shares. If your sending money constantly home and its not paying of a mortgage or going straight into the stock market it could be proven you had the intention of returning home. I know that sounds weird but case law in this area has defined roughly a period of 2 years an enough for you to spend overseas and then change your intention to come back to Oz without it impacting your tax status.

So the general rule is if you move your family and yourself overseas and spend 183 days or more in that year, you stay away for two years or more, you show some intention that you were moving overseas permantly, have treated your assets on leaving appropriately and your employment contract wording is ok you will be most likely treated as a non tax resident of australia. A checklist I found but heaps of other if you google

EXPATRIATE CHECKLIST - RESIDENCY FOR TAX PURPOSES
RESIDES TESTS
The Resides Test is used to determine whether you reside in Australia accordingly to the ordinary meaning of the word. Questions around a person’s behaviour and physical presence help to determine whether this test can be satisfied.
BEHAVIOUR
The ways in which you organise your domestic and economic affairs as part of your life is an influential factor in determining residency status. The following factors are taken into account to determine where you reside.
Maintenance and Location of Personal Assets
I. Will you still maintain a place of residence in Australia? (The presence of your family home may indicate that you reside in Australia)
II. Will you keep your primary personal belongings in Australia?. This may include motor vehicles, and household effects? III. Will you still maintain bank accounts in Australia? (The place where you organise your financial affairs is an indicator of where you reside).
Family and Business/Employment Ties
• On moving abroad will you still have immediate family living in Australia?. (The presence of your family may indicate that you still reside in Australia) • On moving abroad will you still have business/employment ties in Australia
Intention or Purpose of Presence
• How long do you intend to stay abroad? (Sometimes your intentions will be in contrast to your intentions as shown through your behaviour or actions ). • Will you establish a home whilst living abroad? • Will you set up bank accounts whilst living abroad? • Will you purchase any assets whilst living abroad?
Social and Living Arrangements
• Will you be playing sport in a local competition? • Will you become a member of a local community? • Will you be enrolling your children in school once abroad? • (The place where you carry out the ordinary course of your life, your actions and habits; is normally considered your country of residence).
PHYSICAL PRESENCE
The period of time that you spend in a country is not by itself, decisive in determining your residency status. Under Australian Tax Law, six months is considered to be a considerable time when deciding whether ones behaviour is consistent with residing in a country. Nevertheless nothing is to say that if your stay is less than or more than 6 months you will be, or not be considered a resident for tax purposes. Generally it is a combination of the factors of time and behaviour while in Australia that will determine residency status.
• How long have you been living in Australia, prior to living abroad?
STATUATORY TESTS
There are three statutory tests. If you do not satisfy the resides test, you may be considered a resident of Australia for taxation purposes if one of the statutory tests is satisfied.
1. THE DOMICILE TEST.
This is the first statutory test . You will be a resident in Australia if your domicile is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.
• What is your domicile? Where is, considered by law ,to be your permanent residence? Even if you have no fixed place of abode, under the law you will always have a domicile. Established by common law and statutes there are three basic types of abode. I. Domicile by Origin, which is attributed to everyone at birth. For example, a nuptial child adopts the domicile of its father, an ex nuptial child that of its mother. Domicile by choice, which will be inferred by law, if there is both a change in residence and an intention of making the change permanently or at least indefinitely. Any person without a legal disability can have a domicile of choice. III. Domicile by operation of law, which is imposed by law. For example, an infants domicile is that of its parents and changes when the parents domicile changes. A married woman can acquire her own domicile, independent of her husband. The age capacity to have an independent domicile is fixed at 18 years, or when the person marries.
In most cases an Australian resident who goes to work overseas would normally have a domicile in Australia and therefore the domicile test can be applied. However, in doing so the most important consideration will therefore be determining if you have a permanent place of abode abroad.
There are no hard rules that can be used to determine your place of abode, factors taken into account include; I. Intended and actual length of stay overseas. II. Existence of established home overseas III. Existence of residence in Australia IV.
Family and Financial Ties
• Do you have a fixed habitual place of abode overseas where you will continue to stay? • Will you be moving constantly within the country?
• Will you be moving around from country to country with no fixed permanent place of abode?
2.THE 183 DAY TEST
This is the second statutory test. Under this test, to be a non resident for tax purposes it must be satisfied that your usual place of abode is outside Australia, whereas the first statutory test requires us to be satisfied that your permanent place of abode is outside of Australia.
• How many days in the financial year will you be working abroad. It is important to note that the 183 day test is in relation to the financial year not the calender year. • Do you intend to return to Australia for a certain period of time throughout the financial year?
2.THE SUPERANNUTION TEST
This is the third statutory test. This test relates to current
Commonwealth government employees. • Are you a member of a superannuation scheme established under the superannuation Act 1990?
• Are you an eligible employee for the purposes of the superannuation Act 1976”

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Postby woozel » Mon, 14 Feb 2011 10:55 am

Hi

We are in a similar situation. My understanding is that wou will still need to file a tax return in Aus as you are earning income there. You then generate tax losses that you carryforward and that you can utilise when and if you return to Australia and earn income there again.

I am not a tax person, so look into this further, but that is my current understanding. :-)

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Postby Nath21 » Mon, 14 Feb 2011 1:21 pm

Caution: A change of residence status can result in a deemed acquisition or disposal of world-wide assets under Australian capital gains tax legislation. Therefore, the sale of any worldwide asset may give rise to a capital gains tax liability for which carry forward tax losses can be applied. Accordingly, capital gains tax implications need to be considered before a change of residency status occurs.

As an example if I kept all my australian shares and went non-tax resident when I moved to Singapore for an extended period then they would have deemed paper disposal and would have a capital gain or loss.

Things I did before I left - sold all my shares (excluding super which has a trustee over it), notified my bank to withdraw 10% withholding tax on interest as a non resident, took myself of the electoral role, ensured it was clear in my contract that it was open ended and not for a set period of time (sometimes contract clauses can ensure you had an "intent" to move back to australia"), delayed my private medical insurance, didnt claim on medicare whenever I returned to Australia and took my whole family to Singapore (even having a child under 18 stay in Australia can mean you had an intent to stay in Australia). Remeber the tax office can go you pretty much whenever they want and its the sum of all the things you do that counts as long as you dont double dip as I call it and claim things like medicare when you calling yourself a non-tax resident or not incurring deeemd diposal but trying to carry forward tax losses. That stuff is red flag to the tax office because your claiming benefits of a resident yet trying to hide offshore income from them. You cant have it both ways.

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Postby livingthedream » Mon, 14 Feb 2011 5:57 pm

Thanks Nath

Thats awesome info.

Looks like i should be fine

a) Taking the whole family.
b) Contract has no return date.
c) Am pausing my private health fund.
d) Will rent out our property but will not claim any losses will just cop them. as i dont plan to submit a tax return.
e) wont be sending money home, only mortgage repayments
e) notifying bank about withhold tax is no issue

will look into a trust for super and discuss with accountant.

Cheers

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Postby aster » Mon, 14 Feb 2011 6:43 pm

What if you do plan to return but in like 10 yrs, would you still be regarded as a tax resident?

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Postby Nath21 » Tue, 15 Feb 2011 9:03 am

livingthedream wrote:Thanks Nath

Thats awesome info.

Looks like i should be fine

a) Taking the whole family.
b) Contract has no return date.
c) Am pausing my private health fund.
d) Will rent out our property but will not claim any losses will just cop them. as i dont plan to submit a tax return.
e) wont be sending money home, only mortgage repayments
e) notifying bank about withhold tax is no issue

will look into a trust for super and discuss with accountant.

Cheers


Still need to do tax return in oZ as non-resident but you should have nothing to pay. Better to have a record of it and tx office know you have declared yourself a non-tax resident. You will be in a loss situation if negatively geared so nothiong to pay but if you were positively geared you would pay tax at a higher rate.

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Postby Nath21 » Tue, 15 Feb 2011 9:06 am

aster wrote:What if you do plan to return but in like 10 yrs, would you still be regarded as a tax resident?


Depends on your cicumstances per the details of the tests outlined above. You can pretty much have the intention to come back after 2 years and still be able to change your tax status in OZ but its how you do it that counts. As I said you cant double dip the tax system and you have to disconnect yourself with OZ when you leave. i.e take your family, deemed disposal of asset etc

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Postby Mad Scientist » Tue, 15 Feb 2011 9:22 am

Nath21 wrote:
aster wrote:What if you do plan to return but in like 10 yrs, would you still be regarded as a tax resident?


Depends on your cicumstances per the details of the tests outlined above. You can pretty much have the intention to come back after 2 years and still be able to change your tax status in OZ but its how you do it that counts. As I said you cant double dip the tax system and you have to disconnect yourself with OZ when you leave. i.e take your family, deemed disposal of asset etc


What about putting it into trust account ?
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