Australian Resident paying tax on UK savings

[brownie]

I've been living in Aus for 3 years and paying tax - directly taken out of my UK bank - on savings in the UK.

Can I claim this back?

Will I have to pay tax in Australia, if I do that?

Thanks

[Simon Sweetman]

You can't claim the UK tax back, but if you tell the UK bank that you are non-resident, they should stop deducting tax.

And the income will be taxable in Australia anyway (whether UK tax is deducted or not) with UK tax you have paid offset.

[brownie]

Thanks for the quick reply!

With reference to that last bit you said "with UK tax you have paid offset"

I don't follow that bit...are you saying that because i've been paying tax in the UK up to now, i owe nothing in Aus and once i stop paying tax in the UK, i need to pay in Aus?

[tax me less!]

I also cannot follow the reply!

1. If you are a British citizen you will have a personal allowance so should get a refund.

2. I assume you have been declaring the interest on your Australian tax returns each year in any case.

[brownie]

I am British.

I haven't been declaring the interest so far as this is the first month i've had any! (just come into some money)

I'm thinking about transferring the money over to Australia to keep things simple.

The interest rate i can get here is 5.9% and inflation is about 3%. That's a better situation than in the UK where i can get 4.85% and inflation is about 2.5% i believe.

I'm assuming i get taxed on my interest at lower rate in the UK, since i don't earn any money there? Is this correct?

Thanks

[']

In the UK:

As a British subject you are (usually) entitled to a personal allowance, of £ 5,035, before tax is due on the income, and then there is a starting rate band at 10% on the next £ 2,150. above this 20% then 40%

Tax will be deducted by the bank at 20%. You are entitled to claim back the tax suffered, insofar as it exceeds the actual tax due, and you are entitled to receive the interest gross (being non-resident).

It is likely that the income will be taxable in Australia.

James Wood
Shaw & Co

[brownie]

i've thought about it and i think i'm gonna be better off leaving my money in the UK.

i'd appreciate your thoughts on this...

if i bring my money to Oz i will pay tax on the interest at higher rate...because that's my tax bracket ...

if i leave it in the UK - i am a Brit citizen - i would pay very little tax on the interest since i don't earn anything there

at the minute my UK bank are hammering me for tax but i will be able to claim most of it back since i don't earn anything in the UK.

the interest rate available to me in Oz is 5.9% and inflation 3%, which means 2.9% interest

in the UK, i can get 4.9% interest and inflation is 2.5% ... which means 2.4% interest

so the difference in interest is 0.5% better in Oz

if i move my money to Oz the problem is, i'd lose half of my interest in higher rate tax (48%) over here since that is my tax bracket ... so half of my money is taxed at the top rate - and so would my interest be

if i tell my UK bank to stop taking interest off me...i need to start paying it in Oz...i'm not going to do that since i'll clearly be worse off. i'm just going to let the bank tax me in the UK then i'll claim a rebate at the end of the tax year.

does this make sense?

Thanks

[tax me less!]

No - because that would be tax evasion in Australia - which would be a criminal offence.

[kirstie.williamson@a]

The point that you seem to have missed is that you are obliged to declare the interest and pay tax on it in Australia because you are resident there and as such you are taxable on worldwide income. Whether you pay tax or not on it in the UK as well is irrelevant from an Australian tax perspective.
You can ask the UK bank to cease withholding tax which will improve your cashflow position but you will still need to declare the income in Australia. If you did have sufficient UK income to generate a tax liability in the UK then you would take a credit for this tax agaianst the Australian liability.

KW

[al_eebee]

Have a look at

http://www.hmrc.gov.uk/cnr/form_aust2003.htm

and

http://www.hmrc.gov.uk/cnr/aust-indiv2003.pdf