Lessons learned.

[Mark]

Income is usually taxed in the country where it is earned, irrespective of residence. For example, being a non-resident does not exempt one from Australian tax obligations on income earned in Australia. To make things simple: an Australian resident in Indonesia pays tax on worldwide income in Indonesia, but does not pay Australian tax on non-Australian income as he/she is non-resident. However, a FIFO resident in Indonesia (ie, living more than 183 days in Indonesia) but earning income in Australia will pay income tax in Australia on that income and be liable to pay tax again on that income in Indonesia unless relief is claimed under the relevant double taxation treaty. Net net, soul_surfer, I doubt that saving tax should be any motivation for moving to Bali as your tax obligations may potentially increase rather than decrease.

 

[Markit]

Normally country (A) will tax you if you are a resident (or in the case of the US a citizen, regardless of where you reside) unless you can prove that you are domiciled (for tax purposes) in country (B).

You must usually declare to country (A) that you are no longer a tax resident of (A) and that you are living at least 180+ days a year outside of (A).

When you initially make that statement to (A) you generally must provide proof of where you are a resident for (A) to agree not to withhold your taxes.

If you happen to stay one day over the 180 days in Country (A) you will generally become eligible to pay IN FULL that years taxes back.

I hedge my bets with "normally" and "usually" and "generally" in the full knowledge that all countries don't handle taxes in exactly the same ways but generally this "rule of thumb" fits all - usually.

 

[soul_surfer]

My source tells me, as per the ATO website it will all come down to where I'm domiciled. You cannot be domiciled in two places.

The fact that Im living in Bali, kids go to school in bali and I've rented a residence long term in bali, my domicile will be bali. Thats a no brainer.
I could still work in Australia provided i dont spend more the 183 days in Australia and still be domiciled in Bali, then any income earnt out of Australia wouldn't be taxed in Australia. However the disadvantage of this is any money earnt in Australia would be taxed at the full rate from $1. No tax free thresholds as dictated in the chart below.

How ever I have no intention of working in Australia. I intend to work in Asia and the North sea. Been working in Asia, Thailand, Malaysia, Philipines, India, Vietnam for the last 10 years and you never pay tax there. I have asked the companies for any form of tax thats been paid there as it would give me a tax credit in Australia. However every company has always stated they dont pay tax for short projects. There is exemptions you can source them yourself for oil and gas projects. I think its to do with skills though may not be sure?

The UK may be different as i've only done a few jobs over there and company to company has different regs it seems. You have tax witheld in Norway though not some other sectors. Living in Bali though its alot closer to Asia and shorter transits so I will be pushing that avenue.

 

[SHoggard]

As far as I'm aware the Tax discussion comes down to both your NATIONALITY and DOMICILE.

Eg, I believe:
- US citizens are taxed by the IRS on their income world-wide (& a bit of double-tax treaty soft shoe shuffle in the form of adjustments/offsets on tax paid in country of domicile)

- I thought that was the same deal for Aussies (I recall a recent post on the forum by... I think... no idea) so I could never understand why Tax would be a benefit for FIFO workers living in Bali.

- As a Brit, I haven't heard from HM Revenue since 1985 when I signed a declaration at the bank that I would be an overseas resident because most people are taxed monthly on a PAYE (pay as you earn) & so I just had to opt-out.... Ok, slight porky-pie there: I have been making my NI payments all that time to secure National Health & pension benefits & forgot last year & they wrote a nice letter reminding me! It got sorted with an internet transfer.

Soul_surfer, somehow I got the impression from one of your earlier posts that you'd be working in Australia & flying to Bali to live. I'd imagine THAT's where the confusion has come about.... it would probably be quite a complication... but if the plan is to work in the N Sea, Asia, Thailand, Malaysia, Philipines, India, Vietnam etc and NOT in Australia EVER, and you've been doing it for 10 years.....I don't see it as a problem.... and if that's what your accountant says, who the hell are we to disagree?

 

[soul_surfer]

Yes SHoggard I totally agree with you. If you were working in Australia and living in Bali you would be better off being a resident of Australia an ensuring you dont spend 183 days out of Australia and getting the tax free thresholds and just taking advantage of the cheaper cost of living in Bali.

My situation is different as I wont be working in Australia. I wont be coming to Australia except for a holiday to visit family but hopefully they will visit us!!!

 

[Markit]

Just curious but if you domicile out of Oz does that push you and yours out of the National Health and pension coverage. Say you did make the change and one of the kiddies came down with something (Zeus forbid) would you then have to pay full wack in OZ?

 

[soul_surfer]

yes you have to hand in your medicare card.

bearing in mind i pay $4500 a year intax to have a medicare card plus another $1200 a year in private health insurance.

So Im up for over 5k if we dont even use it. We will use that money to get full health insurance when where in bali that will pay for extraction if required.

The hilarious thing about the amount i pay to have a medicare card and you have to pay that. If Im injured when working overseas Im not covered to use my medicare card, how ever all O/S contrats only pay to get you back to your country then your on your own.

 

[davita]

The U.S. has a Nationality tax requirement. No matter where they reside all US Citizens are required to file for tax in the U.S.
The UK, Canada, Australia and others, usually ex-Commonwealth countries, use Residency (domicile) rules.....although those rules are not all identical. This does not exclude non-residents from being taxed on income generated in any of those countries.

Thanks ronb for the link to Australian rules...I was thinking they were the same as UK where, as Shoggard says, it was a requirement to declare. In my case to the Bank of England but maybe now to some other authority. Like Shoggard, I used to pay for pensions which I've now received for many years and HM Revenue ask me every 2 years when I have been to UK; and last year issued me a demand for tax on those pensions. I keep telling them that I've not even been there since 1990 and don't even have a passport (I'm now Canadian), nor a driving licence. The robotic response tells me to be sure and advise them when I return.
The Australian rule seems more relaxed.

@soul_surfer....if not earning in Australia and not residing for more than 182 days in Indonesia seems you are onto a good thing....enjoy.

 

[Fred2]

Im confused, I was under the impression that you have to be in Indonesia for more then 183 days straight & thats why you pay tax when you have a Kitas? My sister worked on cruise ships & paid tax to the country were she was employed from europe somewhere. But she sailed between Mexico,US & Canada most of the year & 2 world trips. She was Taxed in europe, paid in US dollars into a us account then transferred to Australia. Stuffed if I know how it worked. If you are employed in Australia, UK or a asian country thats were you pay your tax. your Accountant can then claim the tax back when you show that you have paid tax in your home country. In Indonesia you would need a Kitas visa & then you can get a tax number. Your children will get a study Kitas from the school (not local), you wife will be on a sosbud visa & will have to leave the country before 181 days. If you are FIFO you will just use VOA (60 days max). I would think you would need to talk to you employer as he would have to look a his tax obligation, he may be required to withhold your tax.

 

[davita]

Im confused, I was under the impression that you have to be in Indonesia for more then 183 days straight & thats why you pay tax when you have a Kitas? My sister worked on cruise ships & paid tax to the country were she was employed from europe somewhere. But she sailed between Mexico,US & Canada most of the year & 2 world trips. She was Taxed in europe, paid in US dollars into a us account then transferred to Australia. Stuffed if I know how it worked. If you are employed in Australia, UK or a asian country thats were you pay your tax. your Accountant can then claim the tax back when you show that you have paid tax in your home country. In Indonesia you would need a Kitas visa & then you can get a tax number. Your children will get a study Kitas from the school (not local), you wife will be on a sosbud visa & will have to leave the country before 181 days. If you are FIFO you will just use VOA (60 days max). I would think you would need to talk to you employer as he would have to look a his tax obligation, he may be required to withhold your tax.

The following is a copy/paste from the 'Living in Indonesia' site:

The government defines an individual taxpayer, who is required to register for NPWP and file income tax returns, as:
•Employed individuals who earn income in excess of the non-taxable income,
•Employed individuals who receive income outside of their main salary,
•Individual taxpayers who receive income from trade/business activities, self-employment or exercise of profession;
•Individual taxpayers who receive income from capital; and
•Foreigners who reside or present in Indonesia for more that 183 days within a single period of 12 months or who are present in Indonesia and have the intention to live in Indonesia. This 12 month period is based on today going back 12 months. It is not a calendar year. (The “intention” to live in Indonesia is seen by such actions as applying for a work permit, owning or renting a house for an extended period, and bringing family members to Indonesia.) Please be advised that, according to the law, those who must pay Indonesian income taxes if they've been here the 183 days in a calendar year, includes, those expats here on KITAS, KITAP, business visa or social/visit visas!
•If you stay less than 183 days in a year, then you may not be obligated to pay Indonesian income tax (only taxes from your home country).. You must prove it by showing your visa stamp and fill out FORM 1770 Individual and Monthly SSP (Surat Setoran Pajak). Of course you must have an income tax number first to complete this form.
•Dependent spouses are included in the husband's tax number and do not have to have a separate number.

@fred2....I understand there are tax provisions for people employed in the Merchant Navy which may include ship employees of cruise lines.

 

[Natasha]

I gave up my Canadian residency a few years ago. Along with speaking to your accountant about what you need to do, I highly recommend speaking directly to the Australian gov and tax department to ensure you fill out all the proper paperwork and that you are very clear as to what you and your family will be forfeiting and giving up, and also what you are still entitled to. Since your wife and children are your dependants, they will most probably have to give up their residency as well-- and therefore you all need to be clear and on the same page about doing this.

For myself giving up Canadian residency was somewhat of a simple process of doing all the necessary paperwork, plus shutting down a business I had in Canada, closing canadian bank accounts, discontinuing subscription to medicare (canadian socialized medicine), proving I have no assets, no possessions, no dependant family, no real estate, etc.. nothing remaining in Canada. I did not have to show residency or a visa of another country in order to terminate my Canadian residency.

You should also inquire about how to regain your Australian residency if you and your family decide one day to move back-- find out how long it takes, what you need to do, will you be entitled to Australian socialized medicine right away and if not, how long you have to wait, etc..

Also keep in mind that if you are no longer an Australian resident, you and your wife might have to give up your Australian driver's licenses (you might be able to keep it, but you probably won't be able to renew it)- that is something to look into if you need a drivers license and would you be able to get one from another country without being a resident, or could you get an International driver's license from Australia without being resident, etc... It's little details like this that need to be thought through and investigated-- so important to get a full list from gov. of what you will give up & not be entitled to and make sure you can get these things in another country.. Same goes with bank accounts and credit cards, some countries have rules that in order to terminate your residency you have to close all bank accounts and credit cards as a means of proving you are leaving-- will you have to do this and where will you open a bank account and do you need to have residency in the country you are moving to in order to do so...? Do think all these things through and make a big list of questions for your accountant and Australian government!!!!!!!

 

[Mark]

There is a lot of useful information in this thread. Bottom line, soul_searcher, is that you will generally have an obligation to pay tax in the countries where you earn the money, even if on short term contracts (of course, you may chose not to pay and take your chances that you won't ever be called out by those countries). If you spread out your residency so that you don't spend more than the required number of days in any country, you may be able to keep the merry-go-round going for some time before anyone catches up to you. I recall a marketing pitch years ago for the cruise liner, The World, which was selling cabin suites, that claimed to offer tax advantages as you would never be resident of any country for tax purposes if you lived onboard Anyway, given that you are clearly not a single man and have a family to support and protect, you really don't have many options. You will be a tax resident somewhere. Indonesia is not a good choice because residents pay tax on worldwide income. Singapore, although expensive to live in, provides another option, as it does not tax the overseas income of its residents if the money is earned from working abroad. Tough to get a visa though without employment in the country.

I'm with Markit on this one, listen to your wife.

 

[no.idea]

I'm with Markit on this one, listen to your wife.

Forget about the wife. There is a whole country full of new ones out there.** do we have a big and brave icon available?**

Note**(You can tell my wife never reads this forum).**

 

[Markit]

Help me on no.idea... where does your wife come from again???

 

[hinakos]

Hi Soul surfer.

I was in a similar situation to you 10 years ago (and also from sunny coast) - got jack of it and moved to bali to beat the tax (no kids though).

First up I worked in WA (even time roster) and lived in Bal. Tax benefit - absolutely nothing.(Australian citizen working in Oz)

You cannot claim to be a non resident for tax purposes if you are an Australian citizen and work in Oz (I don't think you intended to anyway).

Then I got a job in Indonesia doing the same thing and hardly went back to Oz. Unfortunately I still had assets in Oz. This made things complicated as you cant really claim to be a non resident (for taxation) in Oz, and hold real estate (you can technically, but then lose all advantage to negative gear etc......it should however be noted that negative gearing can be banked so when you come back and work for a company in oz again and live in Oz you can get it back over time)

I was never really free from paying tax until I sold my house in Oz. And even then not really free as I had to pay tax on money in the bank which earned interest.

Moving my money out of OZ is not an option for me and I cop that sweet. You don't want to be putting to much coin into Indo banks....Singapore banks however are a different story.

You cannot be part of medicare as a non resident for taxation purposes. Nor are you allowed to contribute to / participate in any superannuation activity based in Oz. To do so negates your status as a non resident for taxation purposes.

To beat this i've invested in real estate over here - and aim for this to be my super. For medicare - instead I have private international health insurance for myself, my better half, and our new baby - for the 3 of us about 6 grand a year - and its nothing fancy, basically just emergency insurance (inpatient stuff only)

If you work for a decent company - you wont have to worry about tax at all (for now) - as long as you don't work in Oz, don't have assets in Oz, and declare yourself a non resident for tax purposes. They (your company) will (should) pay the assignment country proportion of tax where you are stationed. Things are changing though. The IMF is using its loans to developing countries like Indo as leverage to pressure them to close international tax dodge loopholes....so it wont last forever. Already subtle little changes are happening in Indonesia to the banking system which have me wondering. Im now asked to sign paperwork every time I get back from work and walk into a bank stating where my money came from, what it will be used for etc...I know many of you will say this is part of the Govt clamp down on money laundering activity, but I cant help but think that there are much broader changes coming and this is just a pre-cursor.


I think any tax benefit you may gain here will be counterbalanced out by the school fee's.......and also the rent here which is already ridiculous. Don't it expect it to be too much cheaper than Oz for anything decent - unless you don't mind living a long way away away from the only schools which claim to be "international standard"

About the family side of things:

I have no faith in the education system here though, and as soon as our bub is of pre-school age, were outta here and back to Oz (another 5 years yet). Your situation a little different I know - just giving you my perspective. We had all our fun over here and saved out tax $$ over the last 10 or so years (the first 3 years were a waste as I ended up getting it wrong and paying tax anyway)....and started the family late - so will now return to Oz to give the little one a fair crack.

My missus is also pretty lonely - 4 weeks on / 4 weeks off, but she previously worked around Asia also and was lucky enough to be able to work her schedule into mine....so wasn't too bad on her.

Now she has the new bub but her circle of friends is limited (very). Most people you make friends with here have a Bali shelf life of 12 months to 18 months at best. The others are alcoholics who create super strains of STDs during their time off. We don't really know too many western females who have stayed in Bali for the long haul. Not saying there's anything wrong with Indonesian girlfriends - but my missus doesn't really do the bakso stand ngobrol ngobrol at every afternoon. Or the ritualistic Salon Cream Bath / hair straightening ritual every Friday arvo that her Indonesian girlfriends do. So she is a little alienated here in Bali and seems to be longing for greener (cleaner) pastures.

Pissing off surfing all day when you get back from work wont do much to help your cause either - as your missus will find it not worth the hassle to battle the traffic to get out and do her own things.

For us its fine - cheap beer, waves (ridiculously crowded for the most part which will do your F%$#kin head in), projects to tinker with etc....for them - not so much to do. Get her into diving is one option if shes not already into it. But that's a fair drive away from the area you want to be in for your schools etc.


All the best,

Hinakos

 

[SHoggard]

Im confused, I was under the impression that you have to be in Indonesia for more then 183 days straight & thats why you pay tax when you have a Kitas? My sister worked on cruise ships & paid tax to the country were she was employed from europe somewhere. But she sailed between Mexico,US & Canada most of the year & 2 world trips. She was Taxed in europe, paid in US dollars into a us account then transferred to Australia. Stuffed if I know how it worked.

Could be she was hired by the US division of shipping company...

I knew a couple of guys living in KL a few years back, both Brits, both worked for the same Multinational Corporation MNC - (HQ: USA):
chum A: paid tax ONLY in the Malaysia
chum B: paid tax in Malaysia AND the US (though he had never lived there)

Reason:
Chum A: was hired by the European division of the MNC
Chum B: was hired by the US division of the same company (only popped over for a couple of days for the interview)

Both where subsequently seconded to the Malaysian division & were KL residents!

Go figure!

 

[Mark]

Things are changing though. The IMF is using its loans to developing countries like Indo as leverage to pressure them to close international tax dodge loopholes....so it wont last forever. Already subtle little changes are happening in Indonesia to the banking system which have me wondering. Im now asked to sign paperwork every time I get back from work and walk into a bank stating where my money came from, what it will be used for etc...I know many of you will say this is part of the Govt clamp down on money laundering activity, but I cant help but think that there are much broader changes coming and this is just a pre-cursor.

Hinakos, I think you have made a very interesting observation here. Part of the problem with Indonesia's finances is inefficient tax collection. Reducing fuel subsidies will help the country's huge budget deficit, but I understand that there is also significant attention being paid to tax assessment and collection to improve the deficit from the revenue side as well. The IMF is indeed 'back' in Asia and advising countries like Indonesia on these very issues. No doubt that they will also be helping to introduce systems and technology to track movements of money with a view to increasing tax compliance. Something we should all be aware of when organizing our lives in Indonesia.

 

[hinakos]

Also keep in mind that if you are no longer an Australian resident, you and your wife might have to give up your Australian driver's licenses (you might be able to keep it, but you probably won't be able to renew it)- that is something to look into if you need a drivers license and would you be able to get one from another country without being a resident, or could you get an International driver's license from Australia without being resident, etc... It's little details like this that need to be thought through and investigated-- so important to get a full list from gov. of what you will give up & not be entitled to and make sure you can get these things in another country.. Same goes with bank accounts and credit cards, some countries have rules that in order to terminate your residency you have to close all bank accounts and credit cards as a means of proving you are leaving-- will you have to do this and where will you open a bank account and do you need to have residency in the country you are moving to in order to do so...? Do think all these things through and make a big list of questions for your accountant and Australian government!!!!!!!

Becoming a non resident FTP (for tax purposes) in Oz is quite simple. But you need to do the math.

I am a non resident FTP....and still get to keep everything (except tax benefit, medicare, and cant contribute to Oz superannuation). I did sell my house.

Sounds like Canada is very very different to Oz. Our process of becoming non resident FTP is quite simple.

non resident FTP in Oz you can still hold real estate (although cant negative gear etc), and can still hold bank accounts (but pay tax on interest).

 

[ronb]

yes you have to hand in your medicare card.

...................

My feeling is that this is may also be a misleading statement. I am no expert, but it seems to me that Centrelink (who do pensions), Aust Tax Office (who do tax of course), and Dept of Human Services (who do Medicare) all have different ways of determining residency. So, I don't think what you work out with the tax office has any bearing on your Medicare card. I have never heard of anyone asking for the card to be handed in. It seems to me that if you keep using the card from time to time (when you are in Aust) it will stay active. However, maybe this approach could be seen as misuse of the card - if so I would like to hear more.

 

[soul_surfer]

My feeling is that this is may also be a misleading statement. I am no expert, but it seems to me that Centrelink (who do pensions), Aust Tax Office (who do tax of course), and Dept of Human Services (who do Medicare) all have different ways of determining residency. So, I don't think what you work out with the tax office has any bearing on your Medicare card. I have never heard of anyone asking for the card to be handed in. It seems to me that if you keep using the card from time to time (when you are in Aust) it will stay active. However, maybe this approach could be seen as misuse of the card - if so I would like to hear more.

yes Ron i just assumed you had to hand in your card. The thing is a resident who pays tax pays the medicare levy when they do there tax return. If your a non resident for tax purposes your not paying the medicare levy and I assume to use the card would be fraud??
Like if your injured at work you should go through workers compensation for any medical requirements.