New Zealand citizens living in Australia may be treated as a Temporary Resident for Australian tax purposes

Certain New Zealand citizens living in Australia are in the fortunate situation of being treated as a Temporary Resident for Australian tax purposes.

Temporary resident tax benefits in Australia

The Australian tax law provides that ‘Temporary Resident’ individuals only pay tax on Australian sourced income and certain foreign income that is derived as a result of remuneration as an employee or connected with employment. In addition, capital gains on foreign and Australian assets other than those connected with Australian real property should not be subject to Australian tax. This means that foreign rental and other investment income including capital gains on disposal of foreign investments and crypto currencies may not be taxable in Australia.

Further, most individuals on temporary employment visas do not get Medicare health support, so may be exempt from paying the Medicare levy, saving a further 2% on when lodging a tax return.

Temporary residents for tax purposes are defined as individuals who:

1. Hold a temporary visa under the Migration Act;
2. Are not an Australian resident under the Social Security Act; and
3. Their spouse is not an Australian resident under the Social Security Act

The Migration Act, Social Security Act and Income Tax Acts are all complex legislation, so an individual’s tax residency should be determined each year based on the facts. The tax law allows individuals to ‘self-assess’ their tax residency status each year and determine whether to exclude foreign income from their tax return. Care should be taken, because if the Australian Taxation Office (ATO) later audits and determines you are not a temporary resident, then you could be subject to penalties.

New Zealand Temporary Residents

Most New Zealand citizens who arrived in Australia after February 2001, entering using their New Zealand passport and who meet the relevant definitions in the Migration Act and Social Security Act should be deemed a Temporary Resident until such time as they no longer meet the criteria. However, the law is complex and facts will ultimately determine an individual’s tax residency status. Further, even if an individual is a temporary resident, complexities exist where they control a foreign trust or company and receive distributions from same.

How can Exant’s tax advisers assist?

For individuals requiring specialist advice, we can assist by providing advice by:

• Meeting / telephone consultation to discuss your situation and the appropriate tax disclosures
• Provide a letter of advice ensuring you have taken reasonable care with your tax affairs and have a ‘reasonably arguable position’ (penalty protection) for the tax positions taken
• Apply for a private binding ruling with the ATO to confirm the residency status
• Apply for an Objection to earlier tax assessments, to have the ATO determine if you had incorrectly paid tax on foreign income and issue a refund.
• Assist with preparation and lodgement of income tax returns

Exant Advisory are specialists in providing tax advice for International Business and international tax issues, and have provided advice to many New Zealand and other foreign citizens on this issue.  If you require any advice on this issue, please contact your usual Exant adviser or speak with Jamie Towers by calling 07 3218 3900 or fill out the form below.

The law around temporary residents is quite complex.  This publication provides a broad summary based on our understanding of the law at the time of publication and is general advice only and should not be relied upon without seeking professional advice in relation to your own circumstances.