Tax on Overseas Tax-Free Income Earned in The UAE

• 

  mbck on 04/02/2023 - 22:20

  +2

  https://atlaswealth.com/news/determining-your-tax-residency-…

  Educational read.

  • 

    hdus002 on 04/02/2023 - 22:39

    +2

    Yup, read that, in fact contacted them to arrange a consultation.

• 

  Muzeeb on 04/02/2023 - 22:51

  +10

  This is not a big deal

  I've worked with people that have done just this in the past.

  Anecdotally it ends in divorce 60% of the time.

  The novelty of flying to Dubai once a month will wear very thin very quickly. Interstate vs international arrangements are very different.

  This does not constitute tax advice but it definitely constitutes relationship advice.

  • 

    hdus002 on 04/02/2023 - 22:59

    +1

    Thanks. I don't think this will be a strong consideration in the decision. As mentioned earlier, we've done this several times, for extended periods, mostly interstate, and some overseas too (incl 6 months in Turkey, about 6 months in NZ). In all these cases, we take turns to travel, so one time she'll come over, the next time I'll go over, etc. And it's not just me, she used to consult in a clinic in NSW and one in ACT, traveling between the two every week for almost 2 years until a few years back. This does come with a few ups and downs, but that's okay, we've known each other for over 12 years and married for over 10, and I don't think either of us considers this a big issue.

    Also, the lure of a mini vacation in Dubai, with the prospect of heavily discounted flights and a lot of interesting places within a few hour's flights from there is something she can be sold easily on :)

    • 

      Muzeeb on 04/02/2023 - 23:10

      Sounds like you've got it sorted for sure.

      Good luck with your application/offer.

    • 

      treekangagaroo on 05/02/2023 - 16:12

      How do you get discounted flights ? Are you going to work for emirates ?

      • 

        hdus002 on 05/02/2023 - 19:53

        +1

        Yes that's the company. I understand this is similar in other airlines too. Qantas may have this policy too.

• 

  Benoffie on 05/02/2023 - 00:37

  +3

  I stopped reading at the point where the missus is expected to take a week out of the month of her practice to travel around the world, suffer horrendous jet lag and then fly back again, all the while apparently having time off and relaxing, which simply doesn't exist while owning a dentistry practice.

  This won't end well at all.

  • 

    payless69 on 05/02/2023 - 01:58

    1st class in an A380 id doable….

  • 

    Nugs on 05/02/2023 - 04:26

    I can't see where OP states ownership of a dentist practice
    .

    • 

      hdus002 on 05/02/2023 - 07:39

      +2

      Thanks. She doesn't own a practice. Just works in one on a contract. She prefers it that way. We do realise a week off means less pay, but this is alright. (right now she only works 7 days a fortnight out of choice, she would increase this to 10 days a fortnight if we were to do this)

• 

  HardQuiz on 05/02/2023 - 06:20

  perks of that job include 90% off on flight tickets.

  Other than working for the airline itself or its holding entity, can’t think of an employer doing this unlimited.

  If it’s an airline, you are standby, meaning not a guaranteed seat.

  • 

    hdus002 on 05/02/2023 - 07:37

    You're right, it's not guaranteed, and the job is with an airline. Though I hear you can have a reasonable idea of which flights are likely to have seats available. Besides the grade of this role allows 90% off in Business class too, which is less likely to be sold out. Also there are confirmed flights too, but with a lesser 50% discount.

    • 

      Noppy on 06/02/2023 - 11:40

      Business will be more likely to be unavailable.

• 

  Gunnar on 05/02/2023 - 07:21

  +5

  Have you guys been to Dubai? If you haven’t I’d go there before committing to such a decision.

  No way I’d move there for double my income, it’s such a boring, fake place. If your wife finds the lifestyle boring it could Be a double whammy because may be in that position where she neither likes her work nor her life out of it

  • 

    hdus002 on 05/02/2023 - 07:46

    Thanks. Yes, this is one major concern that I have. Neither of us has been there, other than transiting via the airport. The heat in summer looks alarming too. I hear from others too about the fakeness, focus on materialism etc. We are considering these factors too, in addition to the above questions about tax implications.

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  Stopback on 05/02/2023 - 08:16

  Fat fire. Most people do Dubai contracts. Then leave.

  • 

    hdus002 on 05/02/2023 - 08:27

    I had to google that :) Yeah, the UAE does seem to be a revolving door of short-term residents. We don't intend to stay longer than 2-3 years either.

• 

  Quantumcat on 05/02/2023 - 09:06

  +4

  You're only increasing your pay by 50% and your wife is going to lose 23% of her income. You also have to pay a second set of living costs, plus flights and associated costs. You'll only do a little better than breaking even, and severely disrupt your life in the process. Doesn't look like a smart idea from where I'm sitting. Maybe if the pay was more than double. I don't think I would personally do it for less than triple.

  • 

    Muzeeb on 05/02/2023 - 09:35

    +5

    Your equation doesn't factor in the joy of not having to see your wife everyday. Please recompute.

  • 

    hdus002 on 05/02/2023 - 12:09

    Thanks. In our case, wife's income may not be affected much as she can potentially increase her working days to compensate for the lost week (she only works 7 days a fortnight now). Also, the new job pays a generous housing allowance too in addition to the base which should cover living costs.

    "severely disrupt your life in the process", yes this is a factor too which we're considering separately, in addition to trying to understand tax implications. There are a few other such factors too that we're assessing. For eg, one factor is Dubai's proximity to both our Hometowns (4 hrs flight, 1.5 hrs timezone difference), which could mean visiting aging parents more often.

    So, we are weighing up the pros and cons from different angles, and trying to get more information on different aspects.

    Taxes are something we know very little about, hence this thread. From what we've learned so far from this forum and others, it all depends on whether we are assessed as residents for tax purposes, and this seems to be a bit of a grey/subjective area.

• 

  foxmulder on 05/02/2023 - 09:36

  +1

  I was about to point out that the income tax is 0% for individual in UAE but op already mentioned that :) Nice.

  UAE and Australia do not have tax treaty yet.

  Here is top answer in Google:
  Do I pay tax in Australia if I work in Dubai?
  You remain an Australian tax resident and are taxed on all worldwide income, but credits are available for foreign taxes paid. You remain an Australian tax resident under our law, but also become a tax resident of the foreign country.

  This should clearly answer all your 3 questions. Your estimate of UAE income to be 1.5-1.8 times should then be less as they get taxed here. Too bad.

• 

  RockyRaccoon on 05/02/2023 - 09:54

  +1

  Personal Opinion only - not a financial or Tax advisor, just someone who has worked overseas for an 8 year period. My experience may be out of date and I might not have got best advice myself when I did. - Its Tax law so anything is possible. 😀

  The money (tax-free) will be about 1.5-1.8 times what my Net income is here

  You talk about NET income here.

  As Foxmulder has pointed out, you will be most likely classified as a resident here, you are married and your wife lives here

  ATO website

  You're an Australian resident if your domicile (the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

  Note: - THEY need to be satisfied. Unless you can afford a big4 accounting firm, you are going to deal with some fairly judgemental bureaucrats who can out regulate you at every turn. I would think that may require some complicated steps to avoid being caught with that. And may not be economical.

  Going back to the pay. If its 1.8X what you NET here, if you pay the Aust Tax, its probably going to NET the same as you are now. Plus as Quantamcat points out, you have living expenses on top of that, some maybe tax deductible, but thats something I have no idea about.

  If it gives you a leg up in your industry, that maybe an advantage but only you can judge that.

  Personally I would be cautious.

  • 

    hdus002 on 05/02/2023 - 11:53

    Thanks. This is very helpful. I will explore this aspect more.

    If I have to pay tax here at a flat 32% (as per ATO website, no tax-free slabs, etc), then this would be a dealbreaker (hence the reason for this query).

    • 

      thedeep on 05/02/2023 - 14:06

      That situation won't apply - if you are a Tax Resident, you will pay tax on worldwide income, but you will also get the tax free threshold etc.

      If you are not a Tax Resident then you are not subject to tax in Australia on worldwide income. The 32.5% tax rate relates to income linked to Australian (eg rental income on property in Australia etc)

      • 

        hdus002 on 05/02/2023 - 19:59

        Ah, I see. Makes sense. Thanks for this.

• 

  mskeggs on 05/02/2023 - 10:18

  Sounds like you already have plenty of money, and you are going to seriously degrade your life for some more.
  Wouldn’t be my choice.

• 

  Typical16-bitEnjoyer on 05/02/2023 - 10:53

  +2

  Sounds like a divorce in the making.

  Sorry.

• 

  freefall101 on 05/02/2023 - 12:58

  +1

  As I've spent more than 183 days this financial year here already (June 2022-say March 2022), does this mean I'm considered a resident for tax purposes for FY23, and therefore have to pay taxes on the few months of Dubai pay earned in the financial year?

  Talk to an accountant on this one, it can get very messy moving countries. If you declare that you're no longer a resident for tax purposes it may mean you can earn from Mar-Jun without paying tax in Australia, but if you're just renting a house in Dubai or intend to come back then it can change it. Intention and what you're doing matters, it's a case by case review if you're audited.

  In FY24, as my wife is living and earning an income here, and we have joint bank accounts (incl the mortgage and its offset account), does this mean I'd be considered a resident for tax purposes and therefore have to pay tax on the Dubai FY23 income? (which totally negates the "tax-free"'ness of the salary)

  Generally no, but there are tests on this. Check the ATO website on residency tests, you may be an Australian resident still due to other reasons in there. Again, intention matters.

  A few months in, one option we'd consider is having the wife move to Dubai too. The company that is hiring me has their own clinics too (for their employees - it's a large company), and they said they'll look into vacancies there for my wife. She's still trying to find out if this requires sitting tests etc and if salaries are at least sort of comparable, but nevertheless this is an option. In this case, we'll rent out the house when we're gone. Does this mean we'll be considered tax residents (due to owning property and getting rental income), and therefore have to pay tax on the Dubai income?

  No, you won't be a resident if you're renting out a house here. However if you're no longer a tax resident there's all sorts of capital gains and other considerations to take into account.

  And not that you asked, but 1.5-1.8x the amount of money but requiring to relocate to Dubai isn't worth it. I know people who have moved there for 3x the salary because that made it worthwhile, but unless you have a real desire to live there over Australia that does not seem enough money. Cost of living is more expensive there, it's not the kind of place you can go, save a pile of cash and come home to Australia again richer than you were on only 1.5x the salary (particularly since your wife's income might not go up the same amount).

  • 

    hdus002 on 05/02/2023 - 13:54

    Thanks very much, appreciate the detailed response.

    • 

      RockyRaccoon on 05/02/2023 - 16:22

      +1

      Careful here The advice seems to be a little confusing -at least to me, when it says

      In FY24, as my wife is living and earning an income here, and we have joint bank accounts (incl the mortgage and its offset account), does this mean I'd be considered a resident for tax purposes and therefore have to pay tax on the Dubai FY23 income? (which totally negates the "tax-free"'ness of the salary)

      Generally no etc

      I would have probably erred on the side of saying Generally Yes. The ATO is not your friend, given in this scenario you have by your actions shown you are still using Australia as your home base - House, Wife, Bank accounts you will likely to battle against getting declared non residency. Again as you indicate this advice will just help you with discussions with your financial planner. While Tax paid overseas can be claimed off tax liability here, there is no tax being paid in UAE so thats of no help.

      Look here

      https://www.ato.gov.au/Individuals/coming-to-australia-or-go…

      Again, there are so many traps. simple things like filling in your entry and departure forms, that say things like how long are you travelling for and why, and are you a "returning" resident. Something you think will make it easier for customs/immigration clearance (inc lines etc), can nail you for tax a few years later. Financial advisors hopefully know how to help you with advice on how to avoid those traps.

      As i said before, going overseas just for a few or even more dollars isnt worth it for the dollars, BUT for career growth and life experiences its well worth it.

• 

  zoombie on 05/02/2023 - 13:19

  +1

  I think you will failed the Domicile Test as your wife is staying in Australia.

  • 

    KaTst3R on 05/02/2023 - 13:51

    Definitely fail the domicile test if his wife is still living in his permanent place of residence.

    • 

      thedeep on 05/02/2023 - 14:08

      +3

      There is never anything "definite", but certainly makes it more difficult to argue that he intends his "permanent" home to be outside Australia. But maybe that can be evidenced another way, which is why he should get professional advice.

      • 

        hdus002 on 09/02/2023 - 01:01

        Thanks. Spoke to 2 different tax agencies in Dubai that specialise in ex-pats from Australia. Looks like it's the intent that matters. For eg, one tax consultant I spoke to had a very similar situation himself, he moved to Dubai first and his wife followed about a year later. As long as you can show the intent was to move out of Australia for 2+ years (eg rental agreement in Dubai, vehicle purchase, holding an emirates card, evidence of wife job searching etc) apparently are sufficient.

        • 

          hdus002 on 09/02/2023 - 01:04

          @hdus002: Simimar thoughts here: https://www.exfin.com/australian-tax-residency

          "although it is stressed that any assessment of tax residency is very dependent on individual circumstances, most Australians who leave the country with their immediate family with the intention of residing outside the country for two or more years and establishing a home overseas are likely to be treated as non-resident from the date of departure. Note that, very recently, we have seen the ATO begin to accept that an individual may become non-resident even if their spouse or partner remains in Australia, but this needs particular advice"

• 

  JIMB0 on 05/02/2023 - 14:54

  What if you find the local women more attractive?

• 

  CheapskateQueen on 05/02/2023 - 22:58

  183 day test is only one of the residency tests

  you can still be a resident under ordinarily resides test or even the domicile test even if youre not living in Australia so be warned

  • 

    JIMB0 on 06/02/2023 - 10:16

    Sounds as hard to avoid as death.

• 

  bigbadboogieman on 08/02/2023 - 22:47

  Long distance marriage is bound to break down. Speaking from actual similar experience that you have described except my comments are from the other side of the river. I dropped my job in the middle east and travelled back to salvage my relationship.

  • 

    hdus002 on 09/02/2023 - 00:57

    Thanks. As mentioned a couple of times, we've done this several times in the past few years. This isn't much of a concern for us.

    • 

      bigbadboogieman on 09/02/2023 - 09:38

      Ok then, you're fore-warned. What I understood was that you had never done this in an overseas situation but rather interstate only. The time difference makes it far more difficult.

      I hope you worked out the salary difference while including your superannuation. UAE won't pay you any super or equivalent either. Usually a medical insurance is included to a certain AUD limit but I found that better compared to medicare as it also covered outpatient services.

      • Easier and probably cheaper to get a tax accountant. It will be a good investment and tax deductible too.
      • Easier to get classified as non-resident if your wife moves to a smaller place and rents out your joint family home.
      • For 2023 you will most likely be considered as a resident for tax purposes but there used to be something called intention to move abroad which means if you don't have any intentions to come back and live in Australia you become a non-resident for tax purposes from the moment you leave. This can be tricky to calculate. Work out which option comes out cheaper and only an accountant can tell you if that still applies for 2023 (I doubt it though)
      • When overseas you will be taxed on Australian income only in Australia.
      • Cost of living is most definitely different when compared between Australia and UAE. Depending on your lifestyle, UAE can be more expensive, especially when you're alone there maintaining a residence while your wife maintains a residence in Australia.
      • Work culture is also very different. It feels too busy. Everyone there is definitely running fast in the rat race, trying to get a bigger place or a better car over there. Very difficult but not impossible to make genuine friendships there. I found Dubai to be a lonely experience for me despite of being surrounded by so many people.
      • 

        hdus002 on 09/02/2023 - 10:24

        +1

        Thanks very much. This is all very useful information for me.

        Good tip on the rental as opposed to living in the joint home. Will explore this.

        From a discussion with a tax accountant yesterday, for FY23, it will be classified as non-resident from the day of departure as long as the intent is to stay overseas for more than 2 years. (there was something about filling in the departure card right etc).

        The job includes a decent housing allowance, vehicle allowance, medical insurance & free in-house dental/medical clinic etc. For Australian ex-pats, the company also has a pension thing that works out to about 10%, similar to Super here, and can be taken along when leaving the company. We aren't big spenders at all. We cook most days, live in a modest house, drive mid-level cars, have no loans (except PPOR, but money in offset covers most of it) etc. Hopefully, this sort of lifestyle isn't super expensive there.

        Work culture/rat race etc is a major concern I have. I'm trying to find out more about the culture at this specific office via some other sources. There seem to be quite a few Australians there (including the boss of the boss, a couple of peers who I'll be worth with closely etc - they were all part of the interviews), so hoping it's not too bad. But they were all wearing formal shirts during interviews, which is not a good sign :)

        • 

          adbha on 18/08/2023 - 21:38

          @hdus002: @hdus002, have you made the transition? I'm in a similar situation but my wife and kid will stay back in Australia for a while.
          Having followed the chat and having done some research myself, I'll fail the domicile test.

          It would be good to know what would be the tax bracket? Will I be taxed as per Australian rules or will I be taxed at a higher bracket.

          The cost that I incur there on rental and utility bills, will that be exempted from tax here?

  • 

    ukom92 on 31/03/2023 - 19:06

    That's a very western idea. Maybe OP isn't from a western culture

• 

  Hearthstone on 10/02/2023 - 21:03

  when I had family, I have opportunities travel and you get all the perks and probably end up
  25% more in Salary but I have to be away from my kids and family which I particularly don't like

  talked to a few people someone gave me this advice don't sacrifice thing you need for more of the thing you don't need
  and that all made sense and it was an easy decision I stayed put.

  I didn't need more money but I need my family

• 

  adbha on 18/08/2023 - 22:26

  If anyone is the group could answer a few questions

  1. As an Australian citizen, if I fail the domicile test (I've checked and I'll), How much tax will I be liable to pay? Is it as per the current Australian tax bracket / slab?
  2. I'm not able to make that transition with the family right away, it would probably take about an year before they come and join me. The mortgage that I pay here for the owner occupied house, will that be exempted from tax?
  3. my kid is a university student, if my kid stays back and my wife travels with me, will I still fail the domicile test?