Tax on expats

Expatriate executives briefly posted to Australia from Europe, or elsewhere, may have to pay tax in Australia

The Commissioner of Taxation's latest ruling on expats in Australia takes a stricter view than previously, and makes it more likely that persons who stay in Australia even for a short period will have to pay tax there.

The tax office view is that living an "ordinary mode of life" in Australia means an expat becomes an Australian resident and is subject to Australian tax on worldwide income.

The factors which would determine whether an expat has to pay tax in Australia include:

* the intention and purpose of the person's presence in Australia;

* frequency and regularity of visits;

* whether the person brings family to Australia and whether the person owns a house, car or bank accounts in Australia;

* social and living arrangements, eg joining a sports club, enrolling children at school; and

* the purpose and frequency of absences from Australia. The existence of an employment contract in the home country is rarely significant in determining a person's residency status.

Generally speaking, the tax office now takes the view that the more a person settles in and lives a "normal mode of life" in Australia the more likely he/she will have to pay tax here.

Residents of a country with which Australia has a double tax agreement may not be adversely affected.

(Philip de Haan, Hugh Chalmers and Silke Koernicke at Cutler Hughes & Harris, Sydney, have more details.)

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