G’Day Aussie! Are you really an Expat, Dinky-Di Non-Resident?
Recently we helped a husband and wife who were about to come back to Australia, having lived and worked overseas for 8 years.
They wanted some help with their current year of tax, and to learn what may be important for their impending return to Australia.
Whilst overseas, they were very good to lodge all of their income tax returns, on-time, each year, using the free Etax/myTax software provided by the ATO.
Unfortunately, every income tax return was incorrect, so much so that we could not prepare the ‘current’ year tax returns, until we could establish the ‘opening balances’ brought-forward through all of the years. For example, they reported that they were ‘residents’, when they were not, and incorrectly reported/omitted various Australia/foreign income, in every income tax return.
With the incorrect reporting of their residency, that they were ‘residents’, the ATO could-well ask for them to pay Australian tax, on all of their foreign income.
Fortunately, we were able to have all of the returns amended, capturing significant tax losses across the years, which provided them significant tax losses that were of enormous and legitimate value to them. And it meant that their tax returns, as-amended, were now all ‘correct’. This had the further substantial benefit, of re-instating the integrity of their reporting to the ATO, to reduce the chances that they ATO would review or audit their taxation affairs.
Across the 8 years, they were very luck not to be hit with an audit by the ATO (and one wonders how and why, the ‘smart’ ATO systems did not pick-them-up).
So their tax status was corrected, tax losses were captured, and the integrity of their tax returns was achieved.
No hocus-pocus, and no smoke and mirrors. Just getting the tax returns right, albeit quite late.
The moral of the story, of course, is it is always much safer, and easier, and less stressful, and with less risk and audit exposure, to have your income tax returns completed correctly and professionally.
If you are an expat, and a non-resident, and report yourself as a ‘resident’ in your income tax return, you are asking for trouble!
The ATO may provide ‘free software’ that anyone can use, even an expat Aussie. But you are still responsible for correctly reporting your tax residency, any change of residency, and reporting (or not) of Australian and foreign income. Beware of trying to operate on your own tax affairs, if you do not know what you are doing! You may muck up your residency.
You don’t need to risk yourself to an audit, to get a tax benefit. Sometimes, you just need to have your income tax returns prepared correctly, to get the right tax results.