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Tax implications for overseas workers

Australians who work overseas for an extended period of time should be wary of the tax implications that can arise from taking up such offshore opportunities.

The tax residency status of an Australian who move overseas for employment plays a key role in determining how much tax that person is required to pay in Australia.

Individuals who are “residents” of Australia for Australian tax purposes are taxed on both their Australian sourced and worldwide income. Individuals who are classified as “non-residents” are taxed only on their Australian-sourced income. Non-residential individuals are also ineligible for the $18,200 tax-free threshold, and therefore, all of their assessable income is taxed from the very first dollar.

Foreign employment income is any income that an individual receives from working outside Australia. It includes any salary, wages, commissions, bonuses or allowances. For Australian tax residents, this foreign employment income is taxable in Australia and must be included in an Australian tax return.

However, individuals who pay tax on that employment income overseas can claim the foreign tax as ‘credit’ against their Australian tax obligations. To make this claim, an individual must pay (or be believed to have paid) the foreign income tax, and the foreign income tax must be included in their assessable income for Australian income tax purposes.

Non-residents only need to submit an income tax return if they receive Australian-sourced income. However, there is no need to lodge a return if the only Australian-source income received is interest, dividends or royalties that have had the correct amount of non-resident withholding tax deducted and remitted.

Posted on 2 October '15 by , under Tax.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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