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My question relates to residency

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I departed Australia in early July 2020, being an Australian tax resident (and domiciled) up the that time, moved to the UK for work for 175 days and then Italy where I am living and working from January 2021 for the next two years and will presumably be a tax resident of Italy during that time (tax year in Italy is the calendar year). 

I am trying to work out my tax residency for the AU tax year 2020/21 especialy in relation to the time I spent working in the UK.  The UK tax year ends on a 5th April.

If I am considered resident in AU from July to Dec 2020 (the time I worked in the UK) I believe I need to declare the income I earned in the UK in my Australian tax return (Approx $30,000), be taxed on that in AU and claim back the UK tax deducted.  Is this correct?  Do I state the date (Jan 2021) I become a tax resident of Italy on my AU tax return? Do I receive a full years tax free allowance for Australia or pro rate allowance?

I don't believe I am a tax resident of the UK while I worked there as I was there less than 183 days, haven't worked there previously and will not be working there for the next two years.   I did pay into a pension in the UK but don't think that affects the tax residency. Are my conclusions correct?  

Any assistance is appreciated.  

 

 

      

 

 

 

 

 

 

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Most helpful response

ATO Certified Response

ATO Community Support

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Hi @Betty2,


Thanks for the thorough information on your overseas travel and work plans. I've structured my answers by breaking down your questions to make it easy to follow.

 

1. If I am considered resident in AU from July to Dec 2020 (the time I worked in the UK) I believe I need to declare the income I earned in the UK in my Australian tax return (Approx $30,000), be taxed on that in AU and claim back the UK tax deducted.  Is this correct?

 

Your residency status for Australian tax purposes is self-determined, which means we aren't able to provide a yes/no answer on the forum, as you'll need to assess this for yourself. Although we can't make the determination for you, we do have provide tools and examples on our website to help you work this out and I'll link the details below. I've also found a similar question on the forum that explores this in more detail.


If you are considered an Australian resident for tax purposes for the 2020-2021 financial year, then yes, you do need to declare any income from worldwide sources (such as your UK income including any interest earned on that income while it was held in a bank account).
    
Australia has double taxation treaties with the UK and Italy for the purpose of reducing or eliminating individuals being subjected to double taxation. Again, your tax residency status determines the location in which you pay income tax and how much tax you're liable to pay.
    
2. Do I state the date (Jan 2021) I become a tax resident of Italy on my AU tax return?

 

You tax residency status is to be declared on your Australian tax return. You can select whether you were considered a tax resident for part of the year and specify the dates. I'll include the link for instructions on completing individual information for the 2020 tax return below (as the 2021 tax return instructions aren't available yet, but the information should be the same if not similar for 2021). You may still be required to lodge future Australian tax returns, for example, if you have a HELP debt.
    
3. Do I receive a full years tax free allowance for Australia or pro rate allowance?

 

This will depend on the result of your Australian tax residency from the first paragraph. If you were an Australian tax resident for part of the financial year, then you're entitled to a tax free-threshold of $13,464. The remaining $4,736 of the full tax-free threshold is pro-rated according to the number of months you were considered a resident. An example is provided on our webpage 'Tax-free threshold if you are leaving Australia with the intention to reside overseas'.
    
 4. I don't believe I am a tax resident of the UK while I worked there as I was there less than 183 days, haven't worked there previously and will not be working there for the next two years.   I did pay into a pension in the UK but don't think that affects the tax residency. Are my conclusions correct?  

 

The UK Government website advises your residency status usually depends on how many days are spent in the UK during their tax year (6 April- 5 April the following year).
    
You’re automatically resident if either:
• you spent 183 or more days in the UK in the tax year
• your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year

   

You’re automatically non-resident if either:
• you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK resident for the 3 previous tax years)
• you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working

 

Making contributions into a UK pension fund doesn't influence your tax residency status, but your UK tax residency status determines whether you pay tax on the pension or not. Based on the information you've provided, it appears that you may meet the criteria of being a UK Resident for tax purposes, however if you're unable to determine this with the information available it might be wise to obtain professional advice.

 

I hope this all helps and wishing you the best Smiley Happy

 

Links

ATO Website- Work out your residency status for tax purposes

Community Forum- Australian Resident for Tax Purposes

ATO Website- Completing individual information 2020

ATO Website- Tax treaties

ATO Website- Tax-free threshold f you are leaving Australia with the intention to reside overseas

UK GOV Website- UK residence and tax

UK GOV Website- Tax when you get a pension

 

RachATO

1 REPLY 1

Most helpful response

ATO Certified Response

ATO Community Support

Replies 0

Hi @Betty2,


Thanks for the thorough information on your overseas travel and work plans. I've structured my answers by breaking down your questions to make it easy to follow.

 

1. If I am considered resident in AU from July to Dec 2020 (the time I worked in the UK) I believe I need to declare the income I earned in the UK in my Australian tax return (Approx $30,000), be taxed on that in AU and claim back the UK tax deducted.  Is this correct?

 

Your residency status for Australian tax purposes is self-determined, which means we aren't able to provide a yes/no answer on the forum, as you'll need to assess this for yourself. Although we can't make the determination for you, we do have provide tools and examples on our website to help you work this out and I'll link the details below. I've also found a similar question on the forum that explores this in more detail.


If you are considered an Australian resident for tax purposes for the 2020-2021 financial year, then yes, you do need to declare any income from worldwide sources (such as your UK income including any interest earned on that income while it was held in a bank account).
    
Australia has double taxation treaties with the UK and Italy for the purpose of reducing or eliminating individuals being subjected to double taxation. Again, your tax residency status determines the location in which you pay income tax and how much tax you're liable to pay.
    
2. Do I state the date (Jan 2021) I become a tax resident of Italy on my AU tax return?

 

You tax residency status is to be declared on your Australian tax return. You can select whether you were considered a tax resident for part of the year and specify the dates. I'll include the link for instructions on completing individual information for the 2020 tax return below (as the 2021 tax return instructions aren't available yet, but the information should be the same if not similar for 2021). You may still be required to lodge future Australian tax returns, for example, if you have a HELP debt.
    
3. Do I receive a full years tax free allowance for Australia or pro rate allowance?

 

This will depend on the result of your Australian tax residency from the first paragraph. If you were an Australian tax resident for part of the financial year, then you're entitled to a tax free-threshold of $13,464. The remaining $4,736 of the full tax-free threshold is pro-rated according to the number of months you were considered a resident. An example is provided on our webpage 'Tax-free threshold if you are leaving Australia with the intention to reside overseas'.
    
 4. I don't believe I am a tax resident of the UK while I worked there as I was there less than 183 days, haven't worked there previously and will not be working there for the next two years.   I did pay into a pension in the UK but don't think that affects the tax residency. Are my conclusions correct?  

 

The UK Government website advises your residency status usually depends on how many days are spent in the UK during their tax year (6 April- 5 April the following year).
    
You’re automatically resident if either:
• you spent 183 or more days in the UK in the tax year
• your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year

   

You’re automatically non-resident if either:
• you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK resident for the 3 previous tax years)
• you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working

 

Making contributions into a UK pension fund doesn't influence your tax residency status, but your UK tax residency status determines whether you pay tax on the pension or not. Based on the information you've provided, it appears that you may meet the criteria of being a UK Resident for tax purposes, however if you're unable to determine this with the information available it might be wise to obtain professional advice.

 

I hope this all helps and wishing you the best Smiley Happy

 

Links

ATO Website- Work out your residency status for tax purposes

Community Forum- Australian Resident for Tax Purposes

ATO Website- Completing individual information 2020

ATO Website- Tax treaties

ATO Website- Tax-free threshold f you are leaving Australia with the intention to reside overseas

UK GOV Website- UK residence and tax

UK GOV Website- Tax when you get a pension

 

RachATO