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Tax Benefits for Expatriates

Tax benefits for expatriates can include the Living Away From Home Allowance (LAFHA) and a significant change in the Australian tax law that has removed taxation on earnings that you may still accrue outside of Australia.

There are some very specific things that can save expats thousands of dollars, and too often they are not being advised of them.

TAX FOR EXPATS, expats working in Australia

If you are coming to Australia on a 457 and 482 visa you will have to lodge an income tax return. In fact anybody in Australia who earns more than $AUS 6,000 dollars is required to lodge a tax returns.

This applies even though your employer has deducted income tax from your salary. Most Australian employees receive a small refund but if you have Australian investment income this could mean that you need to pay extra tax to cover this additional income

Tax Returns

The Australian tax year starts on July 1 and ends on June 30. In July your employer will issue you with an annual PAYG (Pay As You Go) statement which shows how much income you have earned over the financial year and what tax has been remitted to the tax office on your behalf.

Armed with your PAYG statements you can go on-line and visit the Australian Taxation Office website (www.ato.gov.au) to complete a tax return.

Alternatively, you can use the services of a good tax agent (who understands your expat situation) to complete your return. Unless you are registered with a tax agent you are expected have your tax return lodged by October 31 for the previous period of July 1 to June 30. Persons registered with a tax agent have an extension until May 15 the next year to lodge this return.

The Australian Self Assessment tax system and computer monitoring

The Australian Taxation system works under what is called “self assessment”. Self assessment means you are personally responsible for correctly reporting all your income and any expenses directly related to you earning that income. That means you have to get it right!

To assist them to trap those not contributing their fair share of income tax, the Australian Taxation Office has invested heavily in IT systems which do data checking and cross matching to catch tax cheats who are deliberately manipulating the system for their own ends.

As an example the ATO computers are able to identify taxpayers who understate the interest they have earned in Australia or misreport their employment income. Like everybody else, Australians take a keen interest in whatever could decrease their income tax or whatever can help them to legally reduce their tax and receive a refund.

Among the many things which can cause you to pay more tax includes interest income, dividends received from shares and selling an asset and making a capital gain. If you are a temporary resident certain exemptions can be available to you.

Deductions and a change in the tax law for expats

Deductions, or costs you have paid which would reduce your tax and help you get a refund, are anything that you pay for that directly assists you to earn your income.

These deductible “work-related expenses” could include depreciation on your computer, payment for the internet or stationery, registration/licenses etc but these can only be claimed if these costs are directly related to helping you with your work.

Australian Accountants are the professionals here and specialise in helping expats understand their tax obligations in Australia. We advise expats on how to maximise their deductions as well as report the only right income required in the Australian tax return.

From July 1 2006 the Australian Government no longer taxes those who are not permanent residents of Australia on investment income earned outside of Australia.

This is wonderful for those expats who leave behind their home and rent it out while they are on a visa working in Australia. Although they may be taxable in their home country, they don’t have the onerous task of including their non Australian investments in their Australian tax returns.

Further Information

The intricacies of expat tax is an area few Australian accountants are aware of and Australian Accountants can help you navigate with success through the Australian tax system.

If you find yourself in a position where you would like to benefit from LAFHA, claim relocation expenses and manage your tax return obligations as an expat please contact an Australian Accountants team member today.