Australian / UK tax

[Wary]

You need to go easy with generalizations about double taxation treaties because their interpretation is specific (to countries and cases). It's an extremely complex area, and can be very much circumstantial and dependent on the source of income (earned versus unearned etc.). Also, relief isn't necessarily "complete", or what you'd expect, insofar as the state in which you reside retains a right to taxation when the other state withholds at a lower marginal rate (i.e. you get "partial relief"). Further, "tax friendly" vehicles can be interpreted differently by the contracting states.

From what I remember, the ATO's stance was that if you're considered to be ordinarily living in Australia then you should be paying normal Australian income tax. By "ordinarily", they mean things like having an Austrlian bank account, having kids at school ... So unless you were a traveller just earning a few bob to support your travels along the way, you were subject to their tax rules and had to pay their tax. However, the arrangement I was on was one where a British pseudo-company sent me abroad to work for them and hence a large element of my earnings was subsistence. I paid a small amount of tax in both countries, and some kind of dual tax credit system did apply.

[jamesbrown]

From what I remember, the ATO's stance was that if you're considered to be ordinarily living in Australia then you should be paying normal Australian income tax. By "ordinarily", they mean things like having an Austrlian bank account, having kids at school ... So unless you were a traveller just earning a few bob to support your travels along the way, you were subject to their tax rules and had to pay their tax. However, the arrangement I was on was one where a British pseudo-company sent me abroad to work for them and hence a large element of my earnings was subsistence. I paid a small amount of tax in both countries, and some kind of dual tax credit system did apply.

Yes, each country has tests for residency for tax purposes. If you've really left the UK, double taxation (or treaty benefits) may not affect you, as you'll pay tax like any other resident of your new country. However, it's easier than you think to become a resident in the UK for tax purposes (while living and working overseas), and it will only become easier in the future. IIRC, the 2012 budget had an update on this issue, with UK residency tests scheduled to become much tighter in future.

[BlasterBates]

Having quickly read the Australian UK treaty it does look like it is based on credits, i.e. you can credit tax paid but you're not exempt.

Mainly in Europe you are exempt, or that's my experience.

[ASB]

You need to go easy with generalizations about double taxation treaties because their interpretation is specific (to countries and cases). It's an extremely complex area, and can be very much circumstantial and dependent on the source of income (earned versus unearned etc.). Also, relief isn't necessarily "complete", or what you'd expect, insofar as the state in which you reside retains a right to taxation when the other state withholds at a lower marginal rate (i.e. you get "partial relief"). Further, "tax friendly" vehicles can be interpreted differently by the contracting states.

Very true. Some years ago Portugal issued a withholding tax. This was against personal services provided in Portugal by a non resident company. It was levied at 20% (I think) and simply deducted from invoice payments by the invoicee.

This eventually counted as personal Portuguese income tax paid - provided a certificate was obtained from the Ministry -by the individual who provided the services. The residency status of the individual was irrelevant.

The problem was what to claim it against. I was unable - initially - to claim it against corporate CT. There was no provision for deduction of personal Portuguese income tax against UK CT. There was also some reason (I can't quite remember) where I was unable to claim it against my UK personal tax, I think this was because I had no UK income tax paid on personal earned income.

My accountants did eventually manage to claim it against something (can't remember what) but it was a bit of a struggle.

The point is that generally the worst that will happen is you pay at the higher rate of the two countries involved, but their can be cases where the specific types of income and how they are produced can conspire to make things more difficult.