Moving overseas is an exciting adventure, but it’s essential to address some serious financial considerations before you pack your bags. One of the most important aspects to think about is tax—specifically, what obligations you’ll face both in Australia and in your new country. Tax laws vary widely, and overlooking the finer details could lead to unexpected liabilities or complications. Here’s what you need to consider when making the move from Australia to your new home abroad.
1. Will you be an Australian resident for tax purposes?
Before you move, it’s crucial to determine whether you’ll remain an Australian resident for tax purposes. The Australian Tax Office (ATO) uses several tests to determine your residency status, including the “resides test” and the “domicile test.” According to the ATO, around 400,000 Australians are estimated to be living abroad at any given time, with many continuing to maintain ties to Australia for tax purposes. Even if you physically leave the country, you could still be considered a tax resident, which may impact your obligations with international removals
2. Impact of Double Tax Agreements (DTAs)
Australia has over 40 Double Tax Agreements (DTAs) with countries worldwide, including major international destinations like the United States, United Kingdom, and Singapore. These DTAs are designed to ensure you don’t pay tax twice on the same income—once in Australia and again in your new country. However, the specifics of these agreements vary between countries. For example, the ATO reports that, under most DTAs, Australian residents who move to the UK will generally be able to claim credits for any UK taxes paid, ensuring they aren’t taxed twice on the same income.
3. Capital Gains Tax (CGT)
When you leave Australia, the ATO might treat you as having disposed of certain assets for capital gains tax purposes, even if you haven’t actually sold them. Known as a “deemed disposal,” this could apply to shares, properties, and other investments. In fact, ATO statistics from the 2023 financial year indicate that capital gains tax generated over $17 billion in revenue, highlighting its significance in Australia’s tax system. You might be hit with a tax bill unless you qualify for an exemption or deferral. It’s vital to check if you’ll be liable for CGT on your assets before you arrange your international removals.
4. What about superannuation?
Superannuation is another key area to review before moving. According to ATO data, Australians collectively held more than $3.5 trillion in superannuation assets by mid-2023. While your super will remain in Australia, your ability to contribute or access it may change. For example, if you’re planning on retiring overseas, the tax treatment of your super withdrawals could be different in your new country. Additionally, as a non-resident, you might no longer be able to claim tax deductions for contributions to your super.
5. Foreign employment income
If you’re working overseas, it’s likely your income will be taxed in your new country of residence. However, Australian tax laws may still apply, depending on your residency status and the country you move to. The ATO’s latest data suggests that in the 2022-2023 financial year, more than 600,000 Australians declared foreign income on their tax returns, highlighting how common it is for Australian tax residents to work overseas. If you’re considered a foreign resident, your Australian-sourced income will still be taxable in Australia, but your foreign income may no longer be subject to Australian tax.
6. Keep records up to date
Accurate record-keeping becomes even more important when dealing with international tax laws. According to the ATO, failing to maintain proper records is one of the most common mistakes made by Australians with foreign assets or income. Make sure you maintain detailed records of your income, assets, and financial transactions, both in Australia and abroad. This will not only help with your Australian tax obligations but will also ensure you comply with tax laws in your new country.
7. Seek professional tax advice
Navigating international tax laws can be complex, especially with varying rules between jurisdictions. The ATO recommends seeking professional advice if you’re unsure about your tax obligations. A tax advisor can help you understand the implications of your move, guide you through residency status questions, and assist with tax minimisation strategies.
Moving overseas offers many opportunities, but it also brings a host of financial considerations. By addressing these taxing questions early on, you can avoid costly surprises and ensure a smooth transition to your new life abroad. Whether you’re heading for a new job or planning for retirement, taking care of your tax obligations is a crucial step in the international removals process.
If you’re planning an international move, contact Crown Relocations to ensure a smooth transition from Australia to your new home.
