Moving overseas? Consider these taxing questions

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At any given time, there are roughly one million Australians living and working overseas. And we’re not talking about your six-month Europe trip where you got paid €50 a week (cash) to work at a hostel – most of these people are set up with jobs, bank accounts, health insurance, the lot.

Some of these relocations will have been planned, others spontaneous. Some may intend to return to work in Australia, some may never. Regardless, all will have had to answer the question: what do I do about my home and my super and paying tax and stuff?

If you’re thinking about moving overseas, you should sit down with a tax agent to get across the complexities.Credit: Michael Howard

Alright, they probably don’t ask exactly that, but issues such as tax, superannuation and property are common queries for those considering living and working abroad. It can be tough to know what the best move is, especially if you’re not sure when/if you’ll return.

What’s the problem?

Compounding this problem is the insane number of rules and various tests the tax office applies when attempting to determine your tax residency. A quick glance at the ATO’s online information lists four different tests it uses to determine if someone is required to pay tax in Australia.

And while it may feel like a choice you make, that’s not usually the case, warns tax agent and director of BANTACS, Julia Hartman. Often it’s decided on the “balancing of the particular facts of your case”, she says, and can be far from a cut and dry decision.

What you can do about it

This is one of those areas that is incredibly complex, and would require sitting down with a tax agent to get across fully. However, if you’re thinking about moving overseas, here are a few things to keep in mind:

• What happens to my super? Australia is blessed with one of the best retirement savings systems in the world, so it makes sense that expatriates would want to keep contributing to it if they can. The good news is if you move overseas, you can still contribute to your super, says Jenny Wong, tax lead at CPA Australia. “You can keep making personal or employer contributions to your Australian super fund if you’re a resident for tax purposes,” she says. “But, if you’re no longer a tax resident, there may be some tax implications in your new country of residence, depending on their tax rules around foreign super contributions.” Just because you leave the country doesn’t mean you’re able to access you super early either – you’ll have to wait until retirement age like the rest of us. However, its worth getting in touch with your super fund and letting them know if you won’t be making any contributions for a while.

• What about my property? Along with our super, we Australians also love our homes, and the generous tax treatment that comes with them. However, Hartman warns moving overseas could see you lose the main residence exemption (which exempts you from paying CGT when you sell your home) if you choose to sell up while you’re a non-resident, and you will also lose access to the 50 per cent CGT discount that applies to investment properties. “There is no 50 per cent CGT discount allowable for the period you are a non-resident, this is the case even if you are back in Australia when you sell,” she says – although a pro rata discount may apply for the period you were a resident. If you rent out your home while you’re overseas, you may also be able to claim the main residence CGT exemption, as long as it hasn’t been rented for more than six years.

• What about the Medicare levy? If you qualify as a non-resident for tax purposes, the good news is you won’t have to pay the 2 per cent Medicare levy. However, keep in mind you will also not benefit from the $18,200 tax-free threshold, so any income you do make in Australia – even just $10 – will be taxed at 30 per cent.

• So should I stop my tax residency? As I said, this is a complex question that depends heavily on circumstances such as how long you’re planning to stay overseas, if you want to come back, and what assets you own in Australia. “If you’re moving overseas permanently or for an extended period (more than two years), you could consider stopping your Australian tax residency,” Wong says. “This can exempt you from paying Australian tax on foreign income but could also mean you’re subject to foreign tax rules.” She also advises checking on Australia’s tax treaties with other countries to prevent double taxation, as this can help prevent non-residents from paying excess tax.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.