Tax and ordinary resident test

[Queque]

As if emigration wasn't tough enough, some how I have to solve this tax issue.

 

I emigrated June 2018 on a PR visa but due to the emotional turmoil things have not gone as planned. The catches are 1) I've been a wandering nomad since then, bouncing between S.Africa and Oz (and EU a couple times); living with friends and family. 2) I still work full time for a S.African company remotely wherever I happen to be. 3) I'm paid A$ into Oz account, PAYE is not deducted and my IRP5 says foreign exempt code. 4) The tax years are different between S.Africa and Oz. 5) My income in A$ doesn't match my S.African payslips and IRP5 because my employer gets weird exchange rate on the transfers.

 

I'm losing my mind because I've email a couple S.African tax people with no reply, and in Oz the tax person I spoke to says basically ATO will regard me as an Oz resident unless proven otherwise? 

 

Can anybody please point me in the right direction, I've been battling with this issue since May this year already.

[Hugo2]

Hi

 

if you truly a nomad not spending much time in either country, SARS will probably win the tie-breaker test based on Nationality

 

If you bounced between mainly SA and Oz, you probably never established an habitual home in Oz and not to mention the lack of a permanent home in only one of the two countries

 

What is left is the centre of vital interest test, which is rather complex. 

 

in the final analysis you need to obtain a formal opinion and have this submitted to BOTH ATO and SARS and ask them to adjudicate or comment on the opinion 

 

On the exchange or currency rates, go for average rate as its less complex than spot rate

 

The different tax years are not an issue, use YTD payslips and have your IRP5 split. you can then avail to either section 6quat in SA or the treaty rules

 

For now, no SA PAYE is probably OK as you either enjoy the 183/60 exemption or the tax non-resident exemption BUT in both cases, as you work for a SA company SARS will be allowed to tax [the days in SA/365] x annual salary as per IRP5. Individuals employed are normally not taxed on currency gains

 

Welcome to send message for off line guidance as there is too little info available and providing more on a public platform is NOT encouraged

 

In Australia consider using Sean Neary http://www.nearygroup.com.au/about/ - not cheap but one of the best I have ever worked with 

[Gerhardk]

Hello,

 

Since you receive money in an Australian bank account it makes sense to get certainty from the Australian point of view since the ATO do data-matching of money into accounts and declared for income tax.  This matching often only happens a few years after the event though.

 

It also depends what your Australian bank account is classified as such as non-resident (or foreign resident) account or resident account with TFN.  My guess is the latter and if so the data-matching will certainly raise some questions since you must have provided an Australian address to the bank.  You may also have provided a residential address to the ATO so on their system, you need to declare in Australia.  Assuming you have a TFN, your 30 June 2019 Income Tax return needs to be lodged by 31 October 2019 but if you are linked to a local tax agent, you should have till 15 May 2020 to lodge.

 

It’s usually not hard getting certainty from the ATO. I found most employees are very helpful and the private ruling division competent.  In reality you have to pay tax somewhere on salary income and the tax treaties between countries assist in avoiding double tax.  So, if you pay tax in RSA and are subject to tax in Australia on the same income then Australia should allow a credit for RSA taxes paid.

 

Residence is a fact intensive question and you are welcome to contact me for more information but here is a link that may assist you:  https://www.ato.gov.au/Individuals/international-tax-for-individuals/work-out-your-tax-residency/#Workoutyourresidencystatus

 

Regards,

Gerhard

[Hugo2]

On 9/26/2019 at 6:10 AM, Gerhardk said:

Hello,

 

Since you receive money in an Australian bank account it makes sense to get certainty from the Australian point of view since the ATO do data-matching of money into accounts and declared for income tax.  This matching often only happens a few years after the event though.

 

 

100% agree and we are indeed dealing with so many of these queries back dated to transfers of 2015!!!

[Hugo2]

On 9/26/2019 at 6:10 AM, Gerhardk said:

  In reality you have to pay tax somewhere on salary income and the tax treaties between countries assist in avoiding double tax.  So, if you pay tax in RSA and are subject to tax in Australia on the same income then Australia should allow a credit for RSA taxes paid.

 

100% agree and also take into account that in SA there may be a unilateral exemption based on the 183/60 days test. I doubt that SARS will thus tax in full. @Gerhardkfrom your experience, assume he overpaid SARS, will ATO allow full credit or only the portion they feel SARS is entitled to?  In SA, SARS limits the credit to foreign income while abroad as the s6quat credit is now allowed where the source was SA i.e. for the days in SA they will inists that they get paid and SARS will not allow the credit. They currently very sticky on treaty based credits and as he is employed by SA company, they will deny the ATO tax only option in article 15 for two reasons: he has not tax emigrated and Article 15 Para 2(b) triggers the denial.  

[Gerhardk]

@Hugo2 with 'overpaid SARS' you mean that someone paid tax in RSA on income they should not have or paid more tax than they should?  If a person overpaid SARS then we would exclude it from the ATO credit calculation since it should be refundable (or credited somehow).  We try to get to a final tax number and therefore we look at assessed tax only and not provisional tax paid.  It is a self assessment system and we rarely receive ATO queries about this.

 

However the calculated Australian tax offset is usually much lower than taxes paid in RSA.  By way of example, R1.5m salary February 2020 rates (excluding rebates) seems to be R532k.  At R10/AUD exchange rate say $150k salary, the tax (including Medicare) here will be $46k.  So the tax offset will be limited to this $46k.