Choosing to live in a culture that is different from the one you grew up in can bring with it a mix of joy and nervousness. Among the plethora of decisions you need to consider when moving, one of the most important ones is taxes. This article will explore the tax residency implications of moving overseas to a new country and how to plan for every turn along the way.
Australian Residents Moving Overseas
The best first step is reading up on travel advice articles. Gather as many tips and tricks as you can before you leave so you feel ready for anything that comes your way from foreign exchange to moving a car overseas. You could speak with the Australian Taxation Office as well for advice on where to get started.
Next, look into travel insurance. You not only need to protect your belongings but also ensure you have medical coverage. Anything can happen while you transition into your new life, and insurance for your belongings and your health should be top of mind. Some countries, like Canada, the U.K. and New Zealand all offer universal healthcare for tax-paying, legal residents.
If you’re planning on working in your new home country, you will need to plan well in advance and set up a working visa. If you are moving to New Zealand, however, you will not need to get a visa as long as you are a permanent resident of Australia.
Along with your work visa, you should bring other important documents with you when moving overseas such as your:
- Birth certificate
- Custody arrangement information
- Educational qualifications
While these are all preliminary considerations, taxation overseas can depend on your circumstances and which destination you move to.
Every country has its own unique set of policies when it comes to paying taxes to the local and national governments. We will focus on four different countries in particular: New Zealand, Canada, the United States and the United Kingdom.
New Zealand tax policy
Being an Australian tax resident in New Zealand is a relatively simple transition.
You need to be aware of the 183-day rule, which counts the day you land in NZ. By that time you will need to be paying residency taxes.
As a resident of New Zealand, you are liable for income taxes. Your employer will pay your income taxes for you at a progressive rate. You must apply for a tax number from the Inland Revenue Department when you arrive. If you do not get a tax number, your tax rate will be significantly higher.
Your super fund can be transferred to New Zealand’s KiwiSaver scheme and is not taxed. Unless you are an Australian expat moving to New Zealand, your super fund will stay in Australia untaxed until you reach preservation age and are eligible to access it.
Canadian tax policies
There is an Australian-Canadian tax treaty that you can take advantage of if you move. This means that if you move to the country, you avoid double taxation. This is especially helpful if you have dual citizenship in Australia and Canada. Additionally, if you leave Australia for
Canada during the tax year (1 January to 31 December), you could be eligible for a tax refund by filing an Australian tax return.
Foreign assets must be reported to the Canada Revenue Agency (CRA) such as stocks, shares, real estate or bank accounts overseas if they are valued at $100,000 or more.
In addition to income tax and social security contributions, you should be aware of several other taxes you may be liable for:
- Goods and services tax (GST)
- Harmonised sales tax (HST)
- Provincial sales tax
- Inheritance and gift tax
- Property taxes
- Luxury and excise tax
If you do not apply for residency in Canada, you are taxed on the income you make in Canada and worldwide income.
United States taxes
Moving from Australia to the U.S. can be relatively complicated when it comes to tax paying. To break it down simply here are a few facts:
- The tax year is between 1 January and 31 December.
- The tax authority is known as the Internal Revenue Services (IRS).
- Income tax for residents is known as the Federal Income Tax and is charged at tiered rates between 10% and 37% and there is no tax-free threshold.
- Non-residents are taxed on income sourced from the U.S. Passive income is taxed at a 30% flat rate.
- Social Security Tax is payable by both the individual and their employer.
- Medicare is taxed by every individual at a rate of 1.45% of their income and employers will withhold an additional 0.9% if you earn more than $200,000 a year.
- Each individual will pay their own health insurance.
- Sales taxes apply to most states at a rate between 0% and 13.5%.
- Your super fund is exempt from U.S. taxation.
United Kingdom taxation policies
While the taxation setup is different, the income taxes in the U.K. are lower for a middle- and lower-tax bracket U.K. residents. Taxpayers also have access to different tax-free amounts that vary based on income level and type of income.
Here is an overview of the U.K. tax system:
- The tax year falls between 6 April and 5 April.
- Pay As You Go Withholding (PAYGW) is replaced with Pay As You Earn (PAYE) and can qualify for a tax rebate for excess.
- Progressive rates (between 0% and 45%) apply to taxable income but there are different rates for capital gains tax.
- Health insurance taxes vary depending on your income (between 0% and 13.8%) and are paid by both employer and employee.
- Most employees’ taxes are covered by their employer and typically you will not need to lodge a tax return unless you earned foreign income, you earn more than 100,000 pounds a year or you claim excess PAYE.
- Inheritance tax has a tax rate of 40% above the tax-free threshold of 325,000 pounds.
When to involve a tax professional
With these general tips in mind, there are still many individual circumstances that a professional tax advisor or accountant will need to help you sort through.
OSS World Wide Movers can help you with a smooth transition overseas. Contact us for an in-home moving consultation to get started.