Becoming a non-resident for Australian Tax – Income & Debt complexities

non-resident for Australian Tax – Income & Debt complexities

In the previous blog we discussed Australian tax implications of becoming a non-resident for investments, in this blog we will discuss these implications in relation to income and debts.

Many Australians move abroad indefinitely or decide to live indefinitely where they once initially visited. This may result in being a non-resident for Australian Tax. While these decisions are seldom taken lightly, there are critical tax implications to consider. Australian Tax may not be priority at these times but considering them may save you time and money. These decisions can be looked at proactively to take advantage of tax opportunities but also reactively to ensure you are on top of your tax obligations.

As always, if you are unsure of your Australian Tax residency status, please complete our Residency Research ToolContact us or Book a Consultation.

Income that is not included in your Australian Tax Return as a non-resident for Australian Tax

As a non-resident for Australian Tax, you only pay tax on income sourced in Australia (For example: Australian rental income). However, you generally do not disclose the following sources of income:

  • Australian Dividends (franked or unfranked)
  • Interest
  • Royalties
  • Foreign Sourced Income

Franked Dividends and Franking Credits

Franked Dividends are dividends paid which have already been subject to Australian company tax. This means that the shareholder receives a rebate for the tax paid by the company. For Australian Tax residents that rebate (called a Franking Credit) can be used as to offset other income on their tax returns. However, for non-residents since tax has already been paid on this income, it is not subject to further tax in Australia.

Please note that you may be able to utilise that Franking Credit to offset your income in the tax return of your new country.

Interest, unfranked dividends and royalties

As a non-resident for Australian Tax, you do not have to pay tax on interest, unfranked dividends or royalty income.

However, you must inform the bank, company or share registry that they are no longer a resident of Australia. These institutions must then deduct the correct amount of “withholding tax” on the income derived. Be sure to inform them your current overseas address so they can hold the correct rate of tax.

If you have not informed the relevant institutions of your non-Australian Tax Residency status, we can disclose the amounts to the ATO on an additional attachment to the tax return so that the ATO can issue a withholding tax assessment.

Once again, you may be able to utilise the withholding tax amounts as credits to offset your income in the tax return of your new country.

HECS/HELP and TSL debts

If you have moved overseas and have a Higher Education Contribution Scheme (HECS)/Higher Education Loan Programme (HELP), VET Student Loan (VSL) or Trade Support Loan (TSL) debt, you will have the same repayment obligations as people who live in Australia.

This means if your worldwide income is above the minimum repayment threshold ($45,881 AUD for the 2019-20 tax year or $46,620 AUD for the 2020-21 tax year) you are obliged to make compulsory repayments to the ATO.

You will need to update your contact details using the ATO’s online services via myGov or through Worldwide Advisory. You then must to advise the ATO of your worldwide income, and make compulsory repayments or pay an overseas levy towards your debt if you earn over the minimum repayment threshold.

Please note, the ATO will continue to maintain your loan account. Your debt will not be waived and the amount outstanding will continue to be indexed each year until you have paid off your debt. You may also make voluntary repayments when abroad.

Please contact us or book an appointment to chat further on this. 



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Understand your Australian Tax Residency status

Your residency makes a huge difference to how you are taxed in Australia. Getting your tax residency wrong can cost you thousands. Use our free Residency Research Tool.