Rsa Tax Re Oz Earnings (# Days Out Of Country?)

[Short&Tall]

Just a question about RSA tax requirements.

Before leaving we checked what to do re paying tax, and more importantly not paying re Oz earnings, in RSA and of course I have now lost all my notes!

I seem to remember that you can list your Oz earnings as earned overseas/paid tax overseas and therefore not needing to pay tax in RSA if you have been out of RSA for a total of 188 days/6 months in the relevant tax year?

OH seems to think that this might need to be consecutive days, or that there may be a shorter period that must be consecutive?

Just wondering if anyone knows offhand the way it works?

Thanks

[Short&Tall]

Think I have just found it...

In terms of sub-paragraph ii of Section 10(1)(o), the following conditions need to be fulfilled in order for the said income to qualify for exemption:

aa) The employee must be outside South Africa on business for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and

bb) The employee must be outside South Africa for a continuous period exceeding 60 full days during that period of 12 months, and those services were rendered during that period or periods.

[JDJoburg]

If you move to Australia with the intention of staying here, you will generally be regarded as an Australian tax resident, regardless of how long you've been here. That being the case, the tax treaty between SA and Australia will come into play and will determine how your income will be taxed.

The provisions of the tax treaty will (from a SARS perspective at least) override the normal legislative requirements - if you qualify as an Australian tax resident (which you will if you've migrated with the intention of staying), the "physical presence" rules will not apply, so you won't have to consider the number of days that you've been out of South Africa.

Edited November 27, 2011 by JDJoburg

[Short&Tall]

Thanks JD - that is very useful to know.

We should be fine now as we have already done the 60 days period - just a bit worried if it was a 6 months consecutive requirement in case OH had to visit RSA.

[MadMother]

Hi

If you've been in Australia for the whole tax year, must you declare your Australian earnings and interest earned to SARS??? The only South African 'income' I get is about R100 dividends and a few cents interest on my savings account.

[Deon]

"If you've been in Australia for the whole tax year, must you declare your Australian earnings and interest earned to SARS??? The only South African 'income' I get is about R100 dividends and a few cents interest on my savings account."

If you are in Australia on a 457 visa, you only have to declare your Australian income on your Australian tax return and vice versa for your South African income. If you are on a permant residency visa in Australia, you have to declare your world-wide income on your Australian tax return from the day you enter Australia on the PR visa or PR was granted while in Australia. Any foreign tax paid in a foreign country on income earned in that country will be available for offset against your Australian tax liability.

If you own property/investments/assets in a foreign country, the market value of the property/investments/assets on the day you enter Australia on a PR visa or PR was granted while living in Australia will form the cost base for capital gains tax purposes.

Edited July 7, 2012 by Deon

[JDJoburg]

If you are in Australia on a 457 visa, you only have to declare your Australian income on your Australian tax return and vice versa for your South African income. If you are on a permant residency visa in Australia, you have to declare your world-wide income on your Australian tax return from the day you enter Australia on the PR visa or PR was granted while in Australia.

That is not correct Deon. Your residency for tax purposes is not determined by the type of visa you hold, different rules apply in respect of tax residency. If you are here on a 457 visa and you don't have a regular home in SA anymore, you will generally have to declare your worldwide income (including your SA income) on your Australian tax return. In terms of the tax treaty between the two countries, certain types of SA-source income will be taxable in SA only but in principle you will be an Australian tax resident which means you have to declare your worldwide income (with foreign tax credits available as per the tax treaty). By the same token, you can be the holder of a PR visa without being deemed to be an Australian tax resident. Your visa type generally has no bearing on your tax residency.

Whether you are here on PR or on a 457, if you call Australia home at this point you will certainly have to declare your worldwide income if you don't want to get in trouble with the ATO.

Edited July 7, 2012 by JDJoburg

[Deon]

That is not correct Deon. Your residency for tax purposes is not determined by the type of visa you hold, different rules apply in respect of tax residency. If you are here on a 457 visa and you don't have a regular home in SA anymore, you will generally have to declare your worldwide income (including your SA income) on your Australian tax return. In terms of the tax treaty between the two countries, certain types of SA-source income will be taxable in SA only but in principle you will be an Australian tax resident which means you have to declare your worldwide income (with foreign tax credits available as per the tax treaty). By the same token, you can be the holder of a PR visa without being deemed to be an Australian tax resident. Your visa type generally has no bearing on your tax residency.

Whether you are here on PR or on a 457, if you call Australia home at this point you will certainly have to declare your worldwide income if you don't want to get in trouble with the ATO.

I agree with you that tax residency is not determined by the visa that you hold. I have to disagree with you on the rest.

http://www.ato.gov.a......1.htm&page=2

From the ATO website above, I quote (last point):

“If you hold a temporary visa granted under the Migration Act 1958 and neither you nor your spouse are residents as described in the Social Security Act 1991, you are generally considered to be a temporary resident of Australia (as of 1 July 2006) and will only be liable to pay Australian income tax on income you derive in Australia. However, as a temporary resident, your worldwide income may be assessable in some cases - e.g., your salary and wage income.”

Social Security Act 1991 Section 7(2)

“An Australian resident is a person who:

(a ) resides in Australia; and

(b ) is one of the following:

(i) an Australian citizen;

(ii) the holder of a permanent visa; “

The Department of Immigration and Citizenship describe a 457 visa as a “Temporary Business (Long Stay) - Standard Business Sponsorship (Subclass 457)” http://www.immi.gov....ed-workers/sbs/

Therefore, I stand by my point that you don’t need to declare your world-wide income to the ATO when in Australia on a 457 visa except for some mine exclusions.

Edited July 8, 2012 by Deon

[JDJoburg]

Deon, note that the ATO "examples" page that you provided a link to contains the word "generally", so you have to be careful how you interpret it.

You can as easily quote this page: http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/64131.htm&page=1&H1 where you'll find that most 457 visa holders will fulfill the requirements for tax residency quite easily.

Completing the the ATO "Residency Test Tool" ( http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=Resident.XR4&go=ok) will also show you how difficult it would be NOT to qualify as a tax resident, regardless of your visa status.

Most importantly though, and you'll see this at the top of the first page that you quoted, you have to look at the tax treaty between the two countries, because this will always be the final word on the issue.

Most South Africans who come to Australia on 457's live and work here (and hope to stay here) in exactly the same way as PR visa holders. They will (generally) be taxed on their non-Australian income in exactly the same way as PR visa holders. So I stand by my point: don't think that you don't have to declare your SA income just because you hold a 457 visa. There will be exceptions of course, but generally a 457 visa holder who moves here lock, stock and barrel will be an Australian tax resident.

[Deon]

JDJoburg

I think that you are missing the point. I didn’t suggest that people on a 457 visa isn’t tax residents. They most definitely are tax residents. You will notice from my previous discussion that I didn’t give specific tax advice. Specific tax advice will depend on the facts of each case. The points that I highlighted was general in nature and it was points that will be applicable to the majority of people that are reading the forum. I really don’t see the need to discuss all the specific detail of both the income tax acts (1936 & 1997) here as that may keep us busy for a year or two.

The type of visa does not determine if you are a tax resident in Australia or not. If you are in Australia and you are living here, you will most probably be a tax resident. The fact that you are a tax resident does also not mean that you must declare your world-wide income in Australia. That depends on the visa that you are on (temporary or permanent) as set out in an earlier post.

Income tax liability is determined by the income tax act of the applicable countries where you earn your income from. The tax treaty is mainly used to determine which of the two countries have the right to tax certain income and to determine which country have the right to tax a person on his world-wide income. Tax treaties are mostly based on the OECD model and have a lockout clause to prevent a person to be taxed twice on the same income. The exception is the treaty between Australia and the USA which didn’t have the lockout clause and therefore you can end up paying tax in both countries on your world-wide income if it happen that you are classified as a tax resident in both countries.

People on a 457 visa are classified as being temporary in Australia. At the end of the four years, they either have to renew the visa for another term or leave the country. If the application to renew is not allowed, they have to leave the country. The fact that the person doesn’t maintain a house in RSA does not change his visa status. He is still only temporary in Australia. This status only change if he receive PR. Individuals on a 457 visa do not have the same benefits and/or privileges as an individual on a PR visa. Why do you think individuals on a 457 visa qualify for the living away from home allowance (LAFHA) while living in Australia and individuals on a PR visa don’t? By the way, the changes to the tax act to disqualify them from receiving this allowance is postpone to 1 October 2012.

I notice that you still have doubt towards your point that you make. “So I stand by my point: don't think that you don't have to…”. I can assure you that your assumption is incorrect and that individuals on a 457 don’t need to declare their world-wide income in Australia, not even if they moved to Australia “lock stock and barrel” as you call it. This will only change the day when they receive PR.

[JDJoburg]

I read a bit further and found an explanation of the "temporary resident exemption" on the ATO site. I agree with your comments, thanks for the info Deon. Sorry I missed the crux of your point and made you type me an essay!

(null)

[AfriAus]

Glad that was cleared up

[Donovan83]

From an RSA perspective, once you make the mindshift that you have left and call australia home (I remember one of the court cases describing your place of [tax] residence as "that place to which you would ordinarily return from your wanderings"), then you're an australian tax resident. The days test for residence only comes into play if there is a gray area and it's not discernable.

What I find scary is that even if you've left, even if you're not a resident, even if you've been out of the country for years - SARS still wants a tax return that shows how much foreign income you earned (which is not taxed in SA anyway). I will de-register after I've submitted my first zero Rand tax return since actually it has nothing to do with them how much I earn. Although, it would be quite nice to rub in their face how much tax they are missing out on...

[JDJoburg]

Glad that was cleared up

Hey, I love a good debate. I love it less when I lose the debate though...my ego will probably never recover but at least the truth will prevail!

[Deon]

I read a bit further and found an explanation of the "temporary resident exemption" on the ATO site. I agree with your comments, thanks for the info Deon. Sorry I missed the crux of your point and made you type me an essay!

(null)

No problem mate. It takes a man to admit his mistakes. I must admit that I probably had an unfair advantage. I’m not only practicing as a Tax Agent, I will be finishing my Master in Taxation at the end of August.

Hope you have a great week.

Edited July 9, 2012 by Deon

[JDJoburg]

No problem mate. It takes a man to admit his mistakes. I must admit that I probably had an unfair advantage. I’m not only practicing as a Tax Agent, I will be finishing my Master in Taxation at the end of August.

Hope you have a great week.

Thanks Deon, I used to work in tax law in SA so these things still interest me even if it's not what I do these days. I totally get the point that a temporary resident may not have to pay Australian tax on their non-Australian income even if they otherwise qualify as a tax resident.

The only issue that I'm still unsure about relates to the wording of a certain part of ss 768-910 of the Income Tax Assessment Act (the section that deals with the temporary resident concession):

"(3) However, the following are not non-assessable non-exempt income under subsection (1):

(a) the ordinary income you derive directly or indirectly from a source other than an Australian source to the extent that it is remuneration, for employment undertaken, or services

provided, while you are a temporary resident;" (I think this also applies to "personal services")

If I interpret this directly, it would mean that a South African 457 visa holder who lives in Australia but who still earns, say, some contractor's income from SA, will not qualify for the concession and this income would thus have to be included in their assessable income in Australia.

However, the ATO's pages on this topic only refer to income earned "from employment performed overseas for short periods while you are a resident" - it doesn't refer to the wider exclusion in the Act.

I'd appreciate your thoughts on this if you have a moment - am I interpreting incorrectly or has there been an ATO ruling or "practice note" that came into play at some stage? (unless my copy of the act is outdated of course.)

Hope you don't mind, I don't have access to the proper academic resources needed to research this - I'm pretty sure you do though. The ATO website (although much better than SARS's) is not always that helpful.

Cheers

[Brad76]

I think from the SARS point of view the physical presence test is applied to SA Residents residing overseas. Despite what you've emotionally / physically decided your circumstances to be you may still be liable for tax in SA on certain types of income depending on the amount of time you've spent overseas over a period of a few years. The simple 183 day / 6 month test does not apply in these circumstances, if I recall correctly this test applies to certain categories of workers ie people working on ships, oil riggs etc.

Obviously subject to the provisions of the relevant tax treaty between the two countries referred to earlier by Deon!

Edited July 9, 2012 by Brad76

[Bronwyn&Co]

Lol @ you guys! I also love (reading) a good debate!

Edited July 10, 2012 by Bronwyn&Co

[miraclebabycaw]

I'm going to have a fun situation I can see.. We are leaving 5th December for Oz but I plan on working for my company from Oz till the end of February (finish out the SA tax year). Suits both my self and my company as I will be getting still some sort of salary while starting to look for work over there so won't be 3 months without any income, and it's a busy period for my company (write software for medical aids), and I work from home now anyway. Timing suits me as well because I can work from 3pm oz time to kind of match in with office hours so get to spend some time with my kiddos in the am. It will be paid into my SA bank account and will be taxed in SA. I assume I will just be able to give in my SA IRP5 as tax proof? Or will it rather be a case of giving the SARS IT3 once they have assessed it? I think that though would be an issue because SARS tax season only would start 1 July 2013, and if I understand it Oz's starts 1 June? How soon after their "year end" do you have to put in your tax forms?

Also I read on the 100 steps to immigrating it says keep your relocation expenses as that can be claimed against tax in Oz. Anyone know if this is correct?.

Thanks all.

Shona

[Tracy]

From an RSA perspective, once you make the mindshift that you have left and call australia home (I remember one of the court cases describing your place of [tax] residence as "that place to which you would ordinarily return from your wanderings"), then you're an australian tax resident. The days test for residence only comes into play if there is a gray area and it's not discernable.

What I find scary is that even if you've left, even if you're not a resident, even if you've been out of the country for years - SARS still wants a tax return that shows how much foreign income you earned (which is not taxed in SA anyway). I will de-register after I've submitted my first zero Rand tax return since actually it has nothing to do with them how much I earn. Although, it would be quite nice to rub in their face how much tax they are missing out on...

Donovan,

Is this correct?

Do SARS require you tyo show how much you've earned in Aus?

And confirm they will not tax you if you are not a resident?

I'm about to de-activate everything because I've just done 4 years of zero tax returns......

[miraclebabycaw]

Donovan,

Is this correct?

Do SARS require you tyo show how much you've earned in Aus?

And confirm they will not tax you if you are not a resident?

I'm about to de-activate everything because I've just done 4 years of zero tax returns......

I did see on the SARS website that all South Africans living abroad are supposed to declare worldwide earnings from this year. I'm no tax expert but it looks like it

[21yearsoutofrsa]

I did see on the SARS website that all South Africans living abroad are supposed to declare worldwide earnings from this year. I'm no tax expert but it looks like it

I saw this too. Now the question is what is a South African?

If you are a citizen and live in RSA no question.

If you are a citizen and live offshore you may be a South African resident for tax purposes eg people on LAFHA or you may not

If you are a non resident for tax purposes but a RSA citizen do you have to declare it who knows

What about former citizens who have had their citizenship revoked because they have taken up the citizenship of another country

What about a citizen by decent who has possibly never set foot in RSA.

Or the child of an emigrant

[AfriAus]

I saw this too. Now the question is what is a South African?

If you are a citizen and live in RSA no question.

If you are a citizen and live offshore you may be a South African resident for tax purposes eg people on LAFHA or you may not

If you are a non resident for tax purposes but a RSA citizen do you have to declare it who knows

What about former citizens who have had their citizenship revoked because they have taken up the citizenship of another country

What about a citizen by decent who has possibly never set foot in RSA.

Or the child of an emigrant

Where exactly is this on the SARS website?

People on LAFHA are not necessarily South African residents for SA tax purposes.

[Tracy]

SARS asked me for supporting documents but they were IRP5's - so far nothing about declaring my income from here. I've now submitted all my outstanding returns as zero as I was unemployed for those tax years ie I was earning money here.

I am a non-resident for tax purposes.

No request (yet) for my AUD....

[jonathanb]

RSA: I spent quite a bit of time working in the UK and paid tax there and as far as I was concerned this had nothing to do with SARS so didnt tell them when I did my tax return. As far as they know I was away on holiday and not working.

Aus: I am on a 457 visa and got here in May. When I was doing my ATO return I called them to find out if I needed to include my SA salary and the tax I paid on it but was told not to bother. The lovely guys actually gave me quite a bit of money back as a low income offset as I had only worked for a few months even though my annual salary is way above that.