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| *Ostroff, Fair and Company>>>Australia Taxes |
Tax question US citizen moving to Australia? |
I am moving to Australia, I have my own company, of which all sales are derived outside of Australia. What is my tax situation as an expat living in Australia with a US based company? What is the best way to set things up? Welcome to the world of tax complexity. You can now juggle your U.S. tax return planning with your Australian tax return planning. Without knowing your specific situation (i.e. sources of income, expenses, etc.) it is virtually impossible to do justice with an answer on Yahoo Answers, but let's give it a try. As a US citizen, you are required to file a U.S. income tax return, reporting all of your worldwide income, no matter where you live, using US tax rules. You will be entitled to a foreign income and foreign housing exclusion (Form 2555) and/or a credit for Australian taxes paid on any earned Australian source income (Form 1116). Form 1116 is difficult because it breaks your income into types and you can only take a credit for Australian taxes paid related to the type of income earned--you can't take an Australian tax on Australian interest income against the U.S. tax Australian wage income. Yes, it is confusing and it gets worse. One more item--if you move is job related (i.e. required by your own company, let's say for purposes of managing sales in the Pac Rim or obtaining sales in Australia) then your moving expenses are deductible on your U.S. return, but then you might be setting up a taxable presence for your company in Australia and subjecting your U.S. company to Australian income taxes. Avoiding this may be a simple fix by having an independent contractors agreement with your own company. Likewise, as a Australian resident, you are required to file an Australian income tax return, reporting all of your worldwide income, using Australian tax rules. The good thing is that there is only a national Australian tax return. No state or local tax returns to file! You will need to check with a Australian tax preparer - you may or may not become an Australian resident in 2006 -- it all depends on whether Australia requires you to be in the country for more than 183 days in 2006 (or altogether, including the days in 2006) -- I'm not sure. Now for the jugging part -- What type of income do you expect to earn while living in Australia? If you continue to receive a salary from your US based company, then certain exclusions such as 401(k), profit sharing, plan medical care, etc. might be taxable in Australia althought not taxable in the U.S. Also, you might be able to take the benefit of certain provisions of the US - Australian income tax treaty, or not. http://www.irs.gov/businesses/internatio... You might continue your U.S. social security coverage under what is known as a "totalization agreement" or you might be covered under an Australian version of their social security. You will have to affirmatively apply for this. This will assure that you will continue to get credit for contributions to U.S. social security, unless you prefer to be covered under the Australian plan, unless you don't mind contributing to both. http://www.ssa.gov/international/agreeme... You really need to contact someone who knows both Australian and U.S. income taxes, and someone who can advise you of actions to take BEFORE you relocate. Generally, a BIG-4 CPA firm can help. While expensive, it may be well worth the expense. If you have more info, post it and I will try to reply. Good luck! Source(s): http://www.irs.gov/pub/irs-pdf/p54.pdf... http://www.irs.gov/pub/irs-pdf/p593.pdf... http://www.irs.gov/pub/irs-pdf/f2555.pdf... http://www.irs.gov/pub/irs-pdf/i2555.pdf... http://www.irs.gov/pub/irs-pdf/f1116.pdf... http://www.irs.gov/pub/irs-pdf/i1116.pdf... |
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