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Re: partial year tax residency and income in state without double tax agreement

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Newbie

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Hi, 

I was wondering about the tax status for substantial periods spent overseas in countries without a double tax agreement with Australia (eg: Hong Kong). 

A tax consultant advised me that overseas income already taxed in the other state earned while living there would not be subject to Australian income tax, and that earnings while living in Australia would be taxed on a pro-rata basis (ie: tax thresholds would be adjusted by the proportion of the year in Australia).

Is that correct? Is there such a thing as partial-year tax residency and how does it work?

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Most helpful response

Taxicorn

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First of all you need to work out your residency for tax purposes.

https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-residency/

 

If you were not an Australian Resident for tax purposes when you earned the overseas income then it will not be declared in Australia.

However, once you become an Australian Resident for tax purposes any income earned worldwide will be taxed and declared in Australia.

 

Yes, there is an adjustment for a part year.

The formulae is $13,464 + ($4,736 x months in Australia) /12

Months can includepart months, so if you arrive on say Feb 21 you would have 5 months (Feb, Mar, Apr, May & June)

So $13,464 + ($4,736 x 5 )/12 = $15,437 adjusted tax free threshold.

 

 

1 REPLY 1
Highlighted

Most helpful response

Taxicorn

Replies 0

First of all you need to work out your residency for tax purposes.

https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-residency/

 

If you were not an Australian Resident for tax purposes when you earned the overseas income then it will not be declared in Australia.

However, once you become an Australian Resident for tax purposes any income earned worldwide will be taxed and declared in Australia.

 

Yes, there is an adjustment for a part year.

The formulae is $13,464 + ($4,736 x months in Australia) /12

Months can includepart months, so if you arrive on say Feb 21 you would have 5 months (Feb, Mar, Apr, May & June)

So $13,464 + ($4,736 x 5 )/12 = $15,437 adjusted tax free threshold.