Country Information
General Information

Teaching Abroad: How taxes work for an Australian Expat

Dealing with tax as an Australian expat is made a little bit easier thanks to the understandable ATO website

As with all these articles we’ll be keeping it simple (i.e. you only earn income from your job, you don’t have money coming in from abroad etc.) because we’re not tax professionals and tax gets complicated fast.

Keeping that in mind, expat tax rules for Australian’s are reasonably easy to deal with for basic situations. This is partly because the Australian Tax Office (ATO) has put a lot of clear information onto their website that we can use.

Whether or not you have to pay Australian tax on worldwide income depends as usual on whether or not you’re a resident.

  1. If you are a resident of Australia then you do have to pay tax on it.
  2. If you’re not a resident then you don’t have to pay tax on it.

Residency Questionnaire

The ATO actually has an online questionnaire you can fill in to tell you if you’re a resident or not (although it might come up undetermined) which is definitely the best place to start.

If you're just teaching abroad for a year, then you will usually be a resident, the ATO gives an exact example for that situation here.

What’s behind the calculator? What are the residency tests?

There are 4 tests for residency in Australia, if you pass any one of them then you’re considered resident. If you don’t then you’re not a resident. We’ll ignore the fourth, the superannuation test as it mainly applies to government workers.

We’ll focus on the remaining three.

1. 183 days test

This is the least likely to qualify you as a resident if you’re teaching abroad. This says that if you’re in Australia for more than 183 days in a tax year then you’re a resident unless you can convince the Commissioner your usual home is outside of Australia.

2. Residency according to ordinary concepts

This is evaluated on a case by case basis. They look at a bunch of things like trips to Australia, business and family ties, where you’re employed, where personal effects are kept, where bank accounts are maintained and so on. There’s a more detailed description here.

3. Domicile Test

If you have a domicile in Australia then you’re a resident unless you can convince the ATO that your permanent place of abode is outside Australia.

There’s a good chance you have a domicile in Australia unless you’re planning to migrate abroad in which case you get a domicile of choice.

Summary: Unlike some countries you're not given the exact rules for determining residency, so although these rules are useful to give an idea of what the ATO looks for the only practical way of determining your residency is using the questionnaire, finding an example situation which matches your own or getting a ruling (all of which we'll cover below).

What do you if the residency calculator comes up un-decided?

It's entirely possible the tax calculator will come up un-decided. (Especially if you say your staying for a period of less than two years, it'll often complain about not having enough information).

As you might have noticed above there are so many specific factors about how long your you intend to stay abroad, the bank accounts you maintain etc. that generalising is difficult.

The Bridgland & Co blog here gives a useful checklist of the kind of things that the Australian Tax Office look for when deciding if you’re a resident.

If the residency questionnaire does come up un-decided then you have two options.

  1. Get some professional tax advice or advice/a private ruling from the ATO.
  2. Find an example ruling or case the ATO has given and see if it applies to you.

For point 1, you can find information on getting a private ruling here or the numbers to contact for general advice here.

For point 2, there are a number of examples littered around the ATO website, here, here and here (in order to find the examples on this last page, search the page for EXAMPLES, it's almost at the bottom of the page.).

Do I have to file taxes?

Again the ATO have a nice clear page to clarify this here, it’s pretty specific to when you leave and how long you leave for:

You can file your taxes as a resident or non-resident (you choose), the reason we put all the effort in to finding out if we’re not a resident is that if we get it wrong, don’t pay enough tax and the ATO investigates us, there might be fines and it could be classified as tax avoidance.

What do I do if I’m double taxed?

If you are doubled taxed, then there’s a list of countries that Australia has a double tax treaty with here.

You should be able to claim foreign income tax offset (full information on the ATO website) , which will mean the tax you pay abroad counts as tax paid in Australia, although if the country you’re moving to has lower tax rates than Australia you’ll still have to make up the difference.

Of course this tax relief might work differently depending on which country the double taxation treaty is with. All double tax treaties are different, you’ll need to check for your country.

Image Attribution:

"Income Tax" by Alan Cleaver is licensed under CC BY 2.0.