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Expat tax - maternity pay on return to Australia

Discussion in 'Accounting, Tax & Legal' started by riversrun, 7th Dec, 2010.

  1. riversrun

    riversrun New Member

    7th Dec, 2010
    Doha, Qatar

    After living in the middle east for 3 years I am returning home to Australia. After returning to Australia, I will be paid maternity pay from my employer for 3 months. I am concerned that I will need to pay tax on this. The only basis on which I think I could avoid paying the tax is that the payments are made because of work carried out while I was not a resident of Australia.

    Any thoughts?

    Many thanks for your help.
  2. GunnerGuy

    GunnerGuy Index & Property Investor

    26th Sep, 2008
    Kuala Lumpur, Malaysia
    Expat tax

    ...... i know the answer to this one .....

    OK here goes ....

    If you spend more than 90 days in Australia within one tax year you have to pay tax on your global income for that year irrespective if it was eaened abroad or in Australia.

    eg. If you work abroad from July to March and earn say $250,000 over that period abroad and then return to Australia for Apr/May/June and earn say $40,000 you will have to pay tax as per the usual Australian tax brackets on $290,000. Tac will be paid as the usual tax brackets, 14%, 30% 35% 45% (I cant remember the exact amounts or bands). Thus in this case anything over $180,000 (ie, $110,000) will be in the highest tax bracket.

    If you work abroad and earn good money it is best to return to Australia in May or June. A return to Australia that means you spend more than 90 days in Australia then you pay the usual tax brackets. If you have already paid tax in your foreign country of work then that is taken in to account.

    In my case working in Malaysai where tax is 28%, if I return at any time apart from in May or June the australian tax office will ask me for the additional 17% tax on anything over $180,000 (ie. 45% - 28%)

    A tough deal.

  3. tax guy

    tax guy Member

    9th Dec, 2010
    Sydnye, NSW
    Gunner guy,

    The rule you are explaning is assuming that riversrun is still an Australian resident for tax purposes whilst they are posted in the middle east.

    If you are a non-resident for tax purposes and then become an Australian resident for tax purposes, the income you earnt whilst a non-resident is not included in your tax return. If you continue to derive o/seas income whilst you are an Australian resident then this income should be included.

    If riversrun is a non-resident becoming a resident of Aust for tax purposes, then she would only be taxed on the maternity leave for the period that she is an Australian resident.

    As a resident of Australia you should be subject to tax as resident marginal rates, however you will also have a partial tax free threshold and possible a low income tax offset to reduce the tax.

    If you were to receive the payments periodically then you will be taxed on the amounts you receive whilt you are a resident of Australia. If you could structure your pay so you receive a lump sum prior to becoming an Australian resident then it may be possible that this isn't subject to Australian tax.

    As with anything you would need to consider the anti avoidance provisions in Part IVA