If you’re doing an overseas Fellowship in the future, there are some important tax implications to consider.
The best time to do this is before you leave.
One of the essential things you’ll need is up-to-date information on what the Australian Tax Office (ATO) requires you to declare on your Australian tax return.
To be (an Australian resident for tax purposes) or not to be?
The first consideration relates to your tax residency status under Australian law. This is because the rules that apply to an Australian resident for tax purposes are different to the rules that apply to a non-resident for taxpurposes who resides overseas.
Your tax residency status will generally be determined by the following criteria:
Australian resident for tax purposes
If you’re an Australian resident for tax purposes, you must declare all income earned or derived overseas on your Australian tax return. You’ll also receive a tax credit for any taxes paid overseas to enable you to avoid being doubly taxed. This may result in you having to pay a ‘top up’ tax to the ATO
Non-Australian resident for tax purposes
If you’re not an Australian resident for tax purposes, you aren’t required to declare overseas income in your Australian Tax Return.
However, don’t forget that you will need to complete an Australian tax return and declare any Australian investment income. Bear in mind that being a non-Australian resident for tax purposes may have capital gains tax implications on Australian shares and property.
Dr Sarah Johnson is working as a colorectal Fellow at St Paul’s Hospital in Vancouver, Canada. The duration of her Fellowship is two years.
Sarah has a mortgage over a house in Melbourne that she is renting out during her stay overseas. Currently, she’s living in a rental flat in Vancouver.
Sarah is considered to be an Australian resident for tax purposes because she:
You will normally not be allowed to claim Australian tax deductions for relocation or visa expenses.
Private Health insurance
If you’re deemed to be an Australian resident for tax purposes while overseas, and you suspend your private health insurance, you will still be liable for the Medicare Levy Surcharge on your Australian Tax Return if your combined Australian and overseas income for the financial year is over AUD90,000 for individuals and AUD180,000 for families.
Vanessa Smith BBus (Acc), Adv Dip FS (FP) Cert IV FMB
Senior Consultant |Bongiorno Group
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