Calling Aussies - getting taxed when returning?

[robred]

Hi to all Aussies on this forum. I have a question about being taxed in Oz when/if I go back home permanently to live. I stayed out of Oz for two years when I came to Japan so I completed the non residency requirements. This meant I didn`t have to pay tax on my earnings in Japan.

But I read somewhere (another forum where the info isn`t as clear as on this one) that when/if I return to Oz for good, officials will bail me up and ask me for evidence I`ve been paying tax in Japan for the time I`ve lived and worked there. If I can`t give them the tax statements etc they can then ask me to pay tax on the income I`ve had for all the time I`ve been in Japan.

Is this TRUE or NOT? Sorry about caps but it`s worrying me. One of the schools I worked at was slack and never gave me a tax statement (only worked there for one year) and last year I sent my tax return by mail to the tax office and never got my tax certificates from different employers back. So, can any experienced Aussies help me? Thanks mates.

[richard]

Sorry I cannot answer your question about Australia tax laws and requirements and documentation required but i fyou do need previous tax statements (gensenchoshusho) you can request them from your employers. If they say they cannot provide them, that's a bunch of b/s. A statement from the previous tax year can always be made up and stamped with the company stamp or the accounting firm that does it. Also did you keep a copy of your tax form when filing? If you need a statement from the tax office that you have indeed paid your taxes, you can always get a "nozeishomeisho" which is an official form showing tax amount due from the previous year so if you paid your taxes then this would show zero meaning that you paid your taxes. This issued by the tax office and would require that you go to the office where you filed and request one. There may be a slight handling charge but am not 100% sure on this point. Anyway you do have other resources should you need documentation. R.

[Che]

While Japan is one of the countries where you don't have to pay tax on your earnings in Oz, as far as I know, you still have to pay your medicare levy, about 4% of your income I think.

This really sux because not only can you not access medicare because you're O/S, if you do return to oz, you may find you aren't eligible for the medicare that you've been paying into. this is because the ATO and medicare have different criteria for what qualifies as an australian resident.

that aside, I've not heard of anyone being requested to prove their overseas income, especially as you won't be claiming a refund in oz.

[robred]

Richard and Che - thanks. I`ll follow this info up. Che - I`m not sure but I think medicare levies apply to those Aussies who haven`t done what I have.

I didn`t go home for 2 years when I first came to Japan so that qualified me as a non resident for tax purposes. This should include not paying medicare levies because that is done through the tax system. BTW I like that system - I really hate the system here, I preferred looking at my tax status each year in Oz and knowing how much they would take for my medicare levy through the tax system.

And don`t you think that medicare is dirt cheap compared to the city hall health/pension system here? I`ve been amazed by how much I paid for routine medical treatment here although I pay 20,000 each month supposedly to cover health insurance.

Another reason why this card thing is wrong. Us foreigners are supporting the Japanese system but in Oz we give real benefits to our foreign residents.

[JRrider]

robred-don't worry too much, you are cool. Australian tax is on a self-assessment scheme, which means that they will only ask for your proof if they want to audit you. And in order to be audited, you have to be classified as "high-risk". I don't know your situation, but from what I can tell, I don't think you would be considered high-risk just because you lived out of Australia for two years.

I used to do international tax consulting, so I am familiar with this issue. The two-year rule is just a rule of thumb that they use. Your residency status is actually based on the "intention" of how long you "planned" to be overseas at the time of your leaving australia. If you can proof that you planned to spend more than two years outside Australia (which you mentioned you did...by staying in Japan for two years), then ATO wouldn't even bother asking you to prove anything. You can visit Australia during the two year period, so these visits don't actually "break" your nonresidency period. Your becoming a non-resident and whether you are paid in and out of Australia has nothing to do with your tax-ability by the ATO. You can even become a non-resident for tax purposes and still be paid by an Australian firm into an Australian bank. Think about someone who is an employee of Westpac Australia but works in the Tokyo office and remains to be paid out of Australia into an Australian bank. The ATO wouldn't even be able to tax that income!

So the big question is, "can you prove that you intended to be outside the country for more than two years at the time of leaving australia?". If you can, the ATO wouldn't bother you with any documents.

Just as a sidenote, even if someone left australia to go work in Japan for two years...but became sick after a year and had to move back to Australia to be treated, that person would still be considered a non-resident during that first year and pay no Australian tax because the person was able to establish that he/she "intended" to be out of australia for more than two years AT THE TIME the person left the country.

Happy to help you more.....if you have any other questions. Just ask.

[JRrider]

Australian medicare doesn't give free services to foreign residents. they have to apply for private health insurance. So you can't say we aussies pay medicare for the foreigners living in Australia. We actually don't.

[robred]

Thanks a lot JRrider! More infor if you don`t mind considering - I left Oz with the tax dept owing me money (not the other way around) and I found out recently that I`m not on the electoral roll. Does that mean anything for non residency purposes?

BTW - I wrote on my exit form when I first left Oz to come here that I intended to stay in Japan for one year. That worries me. Does it mean the Oz government can demand taxes for the income I`ve earned in 4 years here? Again thanks. Aussies are the coolest, friendliest people on this earth!

[JRrider]

Gee, life is always complicated, isn't it? =)

First of all, did you get your tax refunds from the ATO? Not that it matters, but I would hate that your money is sitting in someone else's hand, especially with the tax office! Look, your tax position before you left and electoral roll have nothing to do with the determination of your residency status. But if you did send a letter to the electoral roll telling them that you would be out of the country for more than x years, then in a way, this document is a form of proof to the ATO of your residency intention, come audit time.

The fact that you ticked "one year" is a worry (just a little). I don't represent the ATO, so you may want to just pick up the phone and call them for advice. You can be anonymous so you can explain the situation and they won't even ask for your name/number/TFN/address, anything. I have called them several times and they have been extremely professional and helpful. But going back....you ticked one year, so in a way your intention at that time was to be outside Aussieland for one year. The ATO would automatically take that as if you would remain a resident still.

How did you lodge your tax return for the year that you left? Possibly a part-year resident? And for the subsequent years, did you lodge non-resident tax returns?

You know you have to pay 10% withholding tax on interest and 15% on dividends earned from Australian sources, right? Usually, you can get the instos to automaticall deduct withholding taxes for you or you can just send a cheque to the ATO on a yearly basis with a letter stating what you had earned from Australia during that year (this is the method I chose).

If I were you, I wouldn't worry about your situation. The worst that can happen (and you have to be pretty darn unlucky) is that you get audited for the first year that you left the country and pay some taxes back as if you were a resident. But that should be it. There is no way they can come after you for all four years. You can probably substantiate that you did change your mind the following week after being in Japan and decided to be here longer, and therefore declaring yourself as a non resident from the second week. *grin*

A few reasons why I don't think you will be audited or considered as "high risk".

- You live in Japan at the moment....how are they going to audit you? Your residential address and mailing address should be in Japan...if not, I would strongly submit an address change form (download from the ATO website) asap.
- I am making a big assumption here, but you are just a normal bloke/girl with average income, etc. The ATO normally focuses on people with high income and pay no tax (like Kerry Packer).
- You have been living in Japan for more than 4 years. You can just say it was a mistake that you put one year on the departure form. At the end of the day, it is the amount of time you physically spent away from Australia that counts the most.
- The ATO only has the ability to audit you during the first 6 or 7 years. If it has been four years since you left Australia (again, occasional visits back home are okay), then for the (first) year, that may be a problem.....but the positive side about it is that you only have to worry for a few more years. Then after that, they can't (won't) audit you for that year.
- While technically the ATO has a few more years to come after you, they have way too many current cases that are on their to-audit books. I would find it extremely hard to believe that they would even have the bandwidth to "remember" you as a potential case to audit.

Sit back, relax, and enjoy the pachinko with extra money that you didn't have to pay to the ATO!

[robred]

Thanks for that really detailed info. Didn`t know I`d get such a great response and sorry this is so late. Again thanks.