Do I Still Need to Complete a Tax Return as an Expat?
As an Australian expat, one of the most common questions is whether you still need to complete an Australian tax return. If you are not an Australian tax resident, your tax obligations in Australia generally apply only to your Australian-sourced income. However, there are specific situations where you may still need to lodge a return, such as if you have an outstanding HECS/HELP debt.
When Australian Expats May Not Need to Lodge a Tax Return
If you are a non-resident for tax purposes, and none of the following applies to you, then you may not need to complete a tax return:
- No Australian-sourced income including:
-
- Employment income paid after leaving Australia (such as; bonuses, leave payouts, etc.)
- Employee share scheme income partially relating to work performed in Australia
- Rent from Australian properties
- Dividends from Australian shares*
- Trust income from ETFs or managed funds
- Interest income from Australian banks*
-
- No PAYG instalments were paid during the year
- You do not have a HECS/HELP or similar ATO debt
- You marked on your last tax return that it was your ‘final’ return, or submitted ‘returns not necessary’ with no future obligation to lodge.
*Note: If the payment includes sufficient withholding tax, you do not need to disclose it on your tax return. This will usually require you to notify the relevant financial institution and advise them of your residency status and your country you are residing in (as the rate may vary between countries).
Common Misconceptions About Australian Tax for Expats
-
The Tax-Free Threshold for Non-Residents
Many people mistakenly believe that non-residents receive a tax-free threshold, i.e. small levels of income don’t require a tax return. This is not the case. Tax rates for non-residents can be found on the ATO website here.
-
Negatively Geared Rental Properties
If you receive rental income from Australian property, you must complete a tax return, even if the property is negatively geared and generating a loss. You must quantify the loss to carry it forward against future taxable income.
-
HECS/HELP Debts for Non-Residents
Historically, non-residents did not need to disclose their foreign income, so they did not have to pay their HECS/HELP debts. However, this changed from the 2018 tax year. Now, you need to report this income to the ATO annually, so you can repay your HECS/HELP, or similar loans on the same repayment thresholds as though you were an Australian tax resident. As a non-resident this is included as a separate assessment called an ‘Overseas Levy’.
-
Income is Taxed the Same Way
As a non-resident, the ATO taxes your investment income from dividends and interest separately from other ordinary income. It is subject to ‘Withholding Tax’. The ATO assesses withholding tax in its own classification. Therefore, even if you have a negatively geared rental and interest income without sufficient withholding tax applied, you will owe an amount payable in your tax return. You can’t offset losses from an income tax assessment to reduce your amount payable for withholding tax or the overseas levy.
Fixing Outstanding Lodgements
The ATO may impose failure to lodge penalties or general interest charge or shortfall interest charge if you do not meet your obligations.
Generally, the ATO is most lenient. Therefore, your best chance of remission of above penalties is when you have made a genuine mistake and proactively take action to remedy, rather than waiting for the ATO to contact you.
Even if you are not required to lodge a return, and if you have not notified the ATO that your returns are final (even though this is a temporary position), you need to complete non-lodgement advice advising that future returns are not necessary.
More Information: Australian Tax Obligations for Expats
If you’re unsure about whether you need to lodge an Australian tax return as an expat, or if you need assistance with any outstanding lodgements, our tax team at Atlas Wealth can help. We can guide you through the process and ensure your tax affairs are in order.
Contact Atlas Wealth for expert advice on tax planning and financial strategies for Australian expats. Our team is here to help you navigate the complexities of international tax law.
To learn more, check out Atlas Wealth Groups’ podcast: Expat Chat