Living and working overseas is a dream for many Australians. However, once you start doing your taxes, it feels a little less aspirational. Even with an excellent Australian income tax calculator, it can be tricky to figure out what your obligations are. And if you’re a digital nomad who moves around a lot, those complexities are compounded. The world’s tax systems are yet to catch up to the nomadic way of life, so it can often feel like none of the residency rules apply to you.
To help you make sense of these and other issues, we’ve developed this handy guide to ex-pat taxes for Australians.
1. Your tax residency isn’t clear-cut
Before leaving Australia, determine whether your tax residency status will change while you’re away. You can use the Australian Taxation Office’s residency status test to figure this out. However, as mentioned, digital nomads often don’t perfectly meet any of the criteria. If you’re uncertain or you’re already overseas, contact a tax accountant in Australia for advice. Many now specialise in ex-pat taxes, so you should be able to find someone to help.
If it turns out that you are still an Australian resident for tax purposes, you’ll need to lodge an Australian tax return and declare any foreign income you’re earning.
2. HECS-HELP repayments don’t disappear
It used to be that Australians could move overseas permanently and avoid having to pay back their student loans. However, this is no longer the case. You will have the same obligations to repay your HECS or HELP loan as you would if you stayed in Australia. Even if you’re a tax resident in another country, you’ll need to declare your income to the ATO, and if you’re over the HECS-HELP repayment threshold, you’ll have to make the calculated payment on your loan.
3. The Medicare Levy doesn’t disappear either
This fact can be incredibly frustrating for digital nomads who are travelling long-term and not making use of the Australian healthcare system. If you don’t have the minimum required level of private hospital cover at home, you will be liable for the Medicare Levy Surcharge. It doesn’t matter that you’re not using the public system, you’ll still have this surcharge added to your tax bill.
4. You can still claim your home as your main residence
If you rent out your home in Australia while you’re away, you can consider it as your main residence for up to six years for capital gains tax (CGT) purposes. Selling the home within this period may allow you to claim the main residence exemption and avoid CGT on any capital gain from the sale.
If you don’t rent out your vacant home, you can treat it as your main residence indefinitely. Even if you are away from Australia for more than six years, you may still be eligible for the main residence exemption.
5. Self-Managed Super Funds (SMSFs) can get complicated
If you have a self-managed super fund (SMSF), the rules around managing it while overseas are a little tricky. The main management and control of the fund must remain in Australia, and all active members of the fund must be Australian residents. SMSFs are complex enough as it is, so if this sounds like one too many complications for your liking, consider working with a reputable SMSF accountant to ensure you’re ticking all the required boxes.
Your tax situation will always be a little complicated if you live or travel for long periods overseas. However, if you understand the factors outlined above, you should be able to avoid unnecessary complications and legal issues.