Statistics suggest that, on average, close to 1,000 to 4,000 Americans relocate to Australia each year. Attractive employment opportunities, great weather, lovely beaches, and warm, friendly people are only some of the upsides. Add to that an English-speaking culture and excellent prospects for people with qualifications and skills, and you have an ideal country for relocation. Even as you explore the different facets of the move, pay special attention to the taxation regulations down under. You might want to connect with an experienced tax consultant for expats in Australia and understand how laws work, preferably before you move. Here’s a quick overview.
You’ll Continue Filing Returns with the IRS.
Even after moving to Australia, you’ll maintain ties with the US as long as you retain citizenship or a Green Card. When filing the return, you’re required to declare all income from worldwide sources. You’ll also declare the monetary and other assets you own in your new country by completing and submitting FinCEN Form 114 (FBAR). However, you can take advantage of provisions like the Foreign Earned Income Exclusion (FEIE), Foreign Tax Credit (FTC), and Foreign Housing Exclusion (FHE). These exclusions help you avoid paying double taxes on the same income to two different countries. The tax consultant will advise you on the allowances applicable to your particular situation and how to avail of them.
Understanding the Australian Taxation System
Before filing taxes, you must establish bona fide residency in the country. According to Australian laws, if you live and work from a single location for more than six months, you’re a permanent resident. You’re required to file returns with the Australian Tax Office (ATO), which is the equivalent of the IRS back home. Taxes in the country are calculated by way of a progressive rate, and the fiscal year is from July 1 to June 30. The deadline for filing returns is October 31st, but you can get an extension under exceptional circumstances. When moving to Australia, you’ll apply for and obtain a Tax File Number (TFN) and pay taxes using this identification.
Availing of Tax Thresholds
Similar to the US, Australia also taxes income from all worldwide sources, if you have established residency. If you’ve earned an income of AUD18,200, you’ll pay no taxes. But, as income levels increase, you’ll calculate applicable taxes according to a progressive rate. For instance, an income ranging from AUD18,201 to AUD45,000 is taxed at 19% for every dollar earned above AUD18,200. If you don’t have private medical health insurance, you’ll also pay a Medicare levy of 2% on the assessed income. Just as you would pay Social Security in the US, in Australia, residents pay Superannuation.
While the US and Australia have a tax treaty to help residents avoid dual taxation, calculating your income after deducting pension income, retirement accounts, and social security can be a complex process. It is always advisable to contact an experienced CPA to guide you through the taxation systems.
