Taxation status for non-residents

[maxandpaddy]

This question is about tax relating to UK temporary residents in Australia and not resident for tax purposes in the UK.

The ATO says that foreign income of temporary residents is 'non-assessable non‑exempt income' and does not have to be shown on your tax return.

The HMRC says that if you are not resident for tax purposes you do not need to declare this income either.

Does this mean that income from UK savings and investments can effectively be tax free?

[JSK TAXATION]

maxandpaddy

I sound caught betwixt and between! The question hinges on the purpose and the length of time that you are temporarily resident in Australia.

If you are non-UK resident (i.e. absent from the UK for more than 183 days) then UK source income is still taxable in the UK. However, the way it works is that most income other than rentals is effectively tax free.

If absent for less than 183 days then you remain resident in the UK and taxable fully on all sources of income.

If you require further help please let me know.

John S King
Chartered Tax Adviser
www.taxation-advice.com

[maxandpaddy]

Thanks for reply.

I'm in Aus on a 457 temporary long stay (4 yrs) business visa. Sponsored by Aus employer.

Out of the UK for more than 183 days.

I know I am liable for tax on rental income from home in UK but as this is under UK personal allowance, after mortgage interest and costs deducted, the tax office has said I dont have to complete a tax return as there is no liability.

They have also said that if out of UK for 183 day then not a UK resident for tax purposes and they have no interest in income from savings interest etc as not liable to UK tax.

Seems the Aussies aren't interested either.

Just wanted to make sure I'm not missing something and going to get hit with a bill by one or the other of them at some point in the future.

[JSK TAXATION]

maxandpaddy

Where you enter Aus on a visa of the type you mention in your question, then you will meet the 183 day test for residence and therefore will be treated as Aus resident for the period of your stay.

The double tax treaty in force between the two countries provides that in such circumstances, tax payable in Australia on UK source investments is to be reduced by tax paid at source on that income in the UK.

Kind regards,

John S King

[maxandpaddy]

I understand the double taxation agreement but what if no tax is due in the UK. Does that mean no tax is due in Aus?

I have just done my tax return and it says quite clearly that temporary residents do not need to declare foreign source income other than from employment.

So I'm working on the basis that my original asssumption is in fact correct unless anyone can advise me to the contrary.

[mkp]

hi maxandpaddy

On a 457 visa, you are a "Temporary Tax Resident" of Australia (a defined term). This means that you are only taxed on Australian Sourced income. You are NOT taxed in Australia on foreign (ie UK) income and gains.
Therefore your tax treatment in the UK is that of a non-resident without reference to a double tax agreement. Ie Savings income is not taxable in the UK for non-residents.
The above situation changes once you are granted permanent residency (if applicable) to that which John described.

For some, Australia is a tax haven.

Cheers

mkp

[maxandpaddy]

thanks MKP - good to know.

Currenly receiving interest gross but this may change.

Are you also able to advise if tax deducted at source on UK savings is refundable from HMRC if you are non-resident.