Korean Job Discussion Forums

[adobolden]

are there any aussies out there that can help me???

i may seem a little nieve but i had no idea about a wonderful little rule that many governments have in place until talking to some american friends...
anyway, im talking about paying income tax on an individual's worldwide income... i had no idea that come tax time in australia i have to report my earnings - even though they the tax ive already been paying to the korean government!

so im asking if any austrailans have reported their income tax whilst owrking over here??? and did you have to pay any extra tax? how did it work out?

and to any foreigner whos working here, is it just me, or do you too think that this worldwide income tax is criminal??? how can i be expected to pay tax here and back at home? dont get me wrong - id honestly pay 50% of my income towards a good tax system. but when i left australia the roads, hospitals and schools were not exactly getting better... and on top of that i just spent a week in hospital here in korea. it costs well over 1000 us dollars (i get 60% back because of medical insurance) but where the hell are my taxes going if i have to pay to be in hospital???

any advice on the tax situation would be great!!!

cheers

[Ozabout7or8]

Hello Adobolden,

It is a good question and being an ex tax accountant in New Zealand I can give you some of the questions and potential answers even though Icannot swear to know the Australian tax regime.

The answer is as follows:

Most countries have double tax treaties (DTA's) which are made between themselves and a series of other friendly countries. Chances are, that if you can get visa's and other such permissions to enter another country, then your government will have a DTA with them. The NZ government for example has DTA's with over 80 countries last I heard and it may be more.

The main purpose of a DTA is to share out the tax revenues where is may be unclear to whom the person or company in questions should pay taxes. You can see how this might apply to multinational companies, touring rock bands and you yourself. The reason being that most country's tax laws state that any activities carried out on their soil is taxable no matter who does it.

That is why the Korean Government can tax you because they have soverign authority to tax anyone working on their soil.

Now, the question is why would the Australian goernment stil want to tax you. The answer is that you may still be an Austalian Tax Resident, in which case you shuold be taxed in australia and not Korea. Sound funny? The concept of Tax Residency is not to be confused with Physical residency or Permanent Residency in a country, which are related to where you are allowed to be and live. No, Tax residency determines which country is allowed to tax your income.

To lost your New Zealand Tax Residency we must be out of NZ for more than 2 years, and have not enduring relationship to NZ. It is a high threshold, but it basically means that if you shift yourself permanently overseas for the forseeable future and do not have a wife and kids, or house in NZ then you are No longer a NZ Tax Resident and therefore no longer taxed by the NZ Government.

I would assume that a very similar situation exists for Australians, and I am pretty sure you will have an Australia/Korea DTA which will regulate when, how and why you could cease to be and Australian Tax Resident and therefore excape Australian tax, or not.

I would suggest that, based on he NZ rules, you would still be taxed in Australia if you intend to stay in Korea for 2 years or less. If you intend to be out of Australia for more than 2 years then as long as you have no wife/kids or house in Australia you are also in the clear. If you have any of those things I mentioned you need to further investigate to see where you are tax resident.

Finally, why else is a DTA important? They basically prevent double taxation because if you are deemed Tax resident of Australia, they will count all the taxes you paid to the Korean Government as Australian taxes paid and give you a credit for them. If you are deemed a Korean Tax Resident then your Korean taxes will be full and final and the Australian Government will not want to hear from you unless you become Australian Tax Resident again (basically by moving permanently back to Auzzie)

BTW, you cannot choose your Tax Resdiency, it is a fact based on the legal circumstances surrounding yuor situation, and furthermore you might be able to ask an Australian Government Tax hotline to get the answer but if you arent comfortable talking to them yu will need to call an Australian Accountant. If yuo cannot find and Australian Accountant PM me or just call one of your family members/mates in Auzzie and get them to recommend one to you. They should be able to give you then answer with a charge of upto $200 or so depending on how complex your situation.

BTW, Americans are desperately unlucky because their Government is so strong that ALL DTA's with America to other countries stipulate that ALL American Citizens no matter where they are, remain USA Tax Residents as long as they are American Citizens. Really hard for them, I mean they can still get credits for foreign taxes paid but US tax rates are pretty high sometimes.

Hope this helps
Owen McCaffrey

[icicle]

I am familiar with the Austalian Tax System (worked in the ATO for quite a few years some time ago.

It is not the double tax agreement betwen Australia and Korea which decides when we are or are not residents of Australia for the purposes of tax - it is the Australian Income Tax Act and associated rulings.

There are 3 different tests for residency for Tax purposes in Individuals. If you fail any one of them then you will be treated as a resident - which in Australia means having to pay tax on all of your income earned both in Australia and Overseas regardless of whether you have already paid tax on it overseas (you will however in many cases get credit for the tax you have already paid overseas - but with different tax rates in different countries can often still end up with a tax bill).

Whether or not you can qualify as a non-resident for tax purposes depends on your individual circumstances. Information to give you an idea about where you might stand is on the ATO website (www.ato.gov.au). There is a ruling with sets out how the residency part of the tax act is applied. But to be really sure whether or not you can qualify as a non-resident for tax you will need to write a letter requesting a private ruling - so that you know where you stand yourself.

The default position on residency for tax in Australia would be that if you are an Australian citizen then you are going to be liable to pay tax on all your income earned anywhere in the world - unless there is something in the Act, a ruling or Double Tax agreeement which changes it.

Not being liable to pay tax in Korea for the first 2 years of teaching English in an approved school (read public school or university) if an Australian resident for tax comes from the Korea/Australia double tax agreement - and does still mean paying Australian tax on the income. It prevents it from being taxed in both countries - not from being taxed at all.

Perhaps the worst part of this for me is that we still have to pay Medicare Levy (which for those not Australians is tax that covers us for part or all of many health related things like doctors and hospitals) unless we have applied for and been granted every year an exemption from paying medicare levy - Which to me is not good for us in Korea - even if we are covered by the Korean system - which we are. The Medicare situation is covered by a separate system - there is part of one department (not tax) with the specific job of assessing applications for Medicare Levy exemptions and to me it looked tougher to get than the Tax for residents situation -which is tough enough. You have to have the approval letter from this organisation before you do not have to pay medicare levy when your Tax Return is assessed by the ATO.

Icicle

Icicle

[dogshed]

[Yaya]

[superacidjax]

[Ozabout7or8]

[peppermint]

[Yaya]

[Yesterday]

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[icicle]

[Xian]

I spoke to the Australian tax office about this very issue.
There are a few circumstances where people might have to pay taxes in Australia, but I had the impression its not the norm.
I mostly asked for my situation and it was nothing to worry about for me.
I recommend Aussies give them a call. Go to the ATO website, get the number for personal income, follow the relevant prompts until you speak to someone.
Worth checking if your details for peace of mind.

Re tax returns, you are best to register to do an online one for your Australian income, especially if you are earning any money in Australia, including interest. I have had bills sent to me from tax returns years ago where I forgot about declaring bank interest.