I would like to thank H&R Block Australia for providing the information below. It was a huge help as I was in a bit of a tight spot.
A while ago I was contacted by a tax accountant in Sydney offering to do a FAQ for new Australian taxpayers. I jumped on it and sent out an email asking my newsletter subscribers if they had any questions about Australian taxes.
The response was huge. After going through all the questions from readers, I came up with 25 questions and sent them off to the tax accountant then waited for his reply. And waited…and waited…then I started emailing him, still no response. Finally, months later, he replied that he was no longer interest in doing a FAQ. Boo.
That’s when I reached out to H&R Block Australia to see if there was anyway they could help out. Thankfully they said yes but wasn’t able to answer all 25 reader’s questions at once. Instead they suggested starting with the top six questions and then go from there. I do still have all the other tax questions and will be working on getting answers for those myself. I will update this post as I go, so subscribe to notified when those updates are.
Australian Tax FAQs from SMG Readers
- In which country do I report income if I am living in Australia on my spouse’s 457 visa but am working for an overseas company that pays me in foreign currency?
If your spouse is on a 457 visa, that means that you are too. For you, that means that foreign income is generally not subject to income tax but Australian income is subject to income tax. As you are working in Australia – albeit for a foreign company which pays you in a foreign currency – your employment income will be taxable here and must be declared on your tax return.
- What work expenses can I claim on my Australian tax return? Can I claim any of my 457 visa fees since they are work related? What about my child’s tuition, private health insurance, the internet at home or mobile phones used for work?
A 457 visa fee is not sufficiently connected to your work. This is because the purpose of obtaining the temporary visa is to allow you to live in Australia rather than earn assessable income as an employee. This is a private expense and therefore not tax deductible.
You cannot claim a deduction for childcare expenses. These are private expenses even if you need to pay for childcare to go to work.
Private health insurance is not tax deductible. Depending on your income level (this isn’t available to higher income earners), you may be entitled to a rebate on your private health premiums either through a reduced premium or a refundable tax offset through your tax return.
Employees can claim their work-related expenses including work related proportions of home-office expenses, such as home internet or mobile phones. It’s essential to keep a record of your work use (typically a diary kept over a four week period, plus phone/internet bills) to substantiate the cost and the proportion of work-related use.
- Do I owe tax on money I transfer to Australia if I have a 457 visa? What about if I have a permanent residency visa?
You only pay tax on income and merely transferring funds into Australia isn’t income, regardless of your visa type. If the money you’re transferring arises from income earned overseas (from overseas employment for instance, or the sale of an asset), you may have a tax liability on that income, but that’s the case regardless of whether you transfer the proceeds to Australia or not.
- I’m renting out my house back home while living in Australia. Do I need to report that income on my Australian tax return? Will I be taxed on it even if my country has a tax agreement with Australia?
If you’re an Australian resident for tax purpose (which will typically be the case if you’ve been here for more than six months and have settled in one place):
- You generally have to declare all income you earned both in Australia and internationally on your tax return, including the rental income from overseas.
- However, if you have a temporary visa you’re a temporary resident – this means most of your foreign income, including the rental income, is not taxed in Australia and you don’t declare it on your Australian tax return.
You will be taxed on your rental income even if there is a tax agreement with Australia. In most circumstances, you will be able to claim credit for any overseas tax paid against your Australian tax liability (which largely prevents you from paying tax twice on the same income).
- We sold our house back home. Do we owe capital gains tax in Australia even if we paid it back home?
If you are a temporary resident (on a 457 visa for instance), you aren’t taxed on most income and capital gains which arise outside Australia. So, if you sold the property whilst in Australia on a temporary resident visa, there will be no capital gains tax on the disposal of the property back home. If you’re not on a temporary visa (for example, you have a permanent residency visa), and you meet the criteria to be tax resident in Australia (which is complicated but at its simplest means if you’ve been here for more than six months and have settled in one place), you pay tax on all your worldwide income. So, you’ll be liable for capital gains tax here. If you’ve already paid CGT back home, you may be able to get credit for the overseas CGT against your Australian tax bill.
- I received my last paycheck from my employer back home while living in Australia on a 457 visa, but it was within the first six months of my move when I was not a tax paying resident in Australia. Do I need to report that income on my Australian tax return even though I paid tax on that income already back home?
If the income related to services performed before you moved to Australia, you shouldn’t have to pay tax on that income and won’t need to include it on your return. If you moved here and were still doing work for that overseas employer, you would be liable to tax on that income and will need to declare it (you may get a credit against your Australian tax for any overseas tax you have paid on the same income). Note that if you are now Australian tax resident, you will be regarded as having been tax resident from the date you arrived, not from the end of the initial six-month period.
Once again, thank you H&R Block Australia for your help with this.
H&R Block Australia has tax guides and an extensive FAQ of their own that is worth checking out.
As I said at the beginning of this post, I still have many more questions to get answers to. If you’re interested in getting updates on this post, subscribe to the SMG newsletter as I will send out those updates to my email subscribers. Cheers.