Cruising and Personal Taxation Status

[bbhflts]

Hi All.

I don't see that anyone has discussed this yet.

Scenario:

Cruising the world for the next few years. Will not be resident nor domicile during this period in any country. Whilst I'm an Australian and also hold UK Citizenship, has anyone any advice on residence/domicile status when cruising and in particular in how it relates to taxation. Now considering when cruising, the cost advice seems to be approx $10K-20K per year. Withdrawing, transferring monies during this time could be seen as personal income. This could be from stocks, dividends, savings account withdrawal. How does everyone cruising internationally deal with this?

Cheers.

Ben.

[barnakiel]

You are taxed in your home country.

If you overstay somewhere, you may become a tax resident there (e.g. the EU) then you pay taxes on whatever you make in the part of the year that you spend there as well as on your cars, houses and boats. It is not your choice, it is something that happens after a specific number of days (180 in Spain, e.g.)

Simply do not overstay where the tax residence exists separately from factual residence.

Cheers,
b.

[svlamorocha]

Originally Posted by bbhflts

Hi All.

I don't see that anyone has discussed this yet.

Scenario:

Cruising the world for the next few years. Will not be resident nor domicile during this period in any country. Whilst I'm an Australian and also hold UK Citizenship, has anyone any advice on residence/domicile status when cruising and in particular in how it relates to taxation. Now considering when cruising, the cost advice seems to be approx $10K-20K per year. Withdrawing, transferring monies during this time could be seen as personal income. This could be from stocks, dividends, savings account withdrawal. How does everyone cruising internationally deal with this?

Cheers.

Ben.

I suggest you read about the UK definition for domicile (roughly same for English law and UK taxes). You always keep your previous domicile until you get a new domicile. Residence is another story.
Google "nondom".
Cheers

[El Pinguino]

Originally Posted by bbhflts

Hi All.

I don't see that anyone has discussed this yet.

Scenario:

Cruising the world for the next few years. Will not be resident nor domicile during this period in any country. Whilst I'm an Australian and also hold UK Citizenship, has anyone any advice on residence/domicile status when cruising and in particular in how it relates to taxation. Now considering when cruising, the cost advice seems to be approx $10K-20K per year. Withdrawing, transferring monies during this time could be seen as personal income. This could be from stocks, dividends, savings account withdrawal. How does everyone cruising internationally deal with this?

Cheers.

Ben.

You will still be an Australian resident for tax purposes and life will just roll along as it always has.

However...........

You don't say how old you are.

If you are of a certain age and are receiving any benefits you need to watch how long you are out of the country at a time.

All I have is a Commonwealth Seniors Health Card which gets me cheap pills. They have changed the period , it has been extended to 19 weeks, up from the old 6 weeks, but if you are out for more than 19 you have to re-apply and new, harsher, income tests apply https://www.superguide.com.au/smsfs/...alth-card-test. I'm pretty sure similar things happen with all other Oz benefits.

Similar but different for Kiwis and their age pensions.

[MarkJ]

Its really important not to screw this one up!
For Australians:

You must* remain a resident for tax purposes.

* if you have substantial wealth invested outside Australia your accountant will be the only person who can advise you. But, hey, if you are that wealthy you won't be asking here anyway.

So most will want to stay a Resident for Tax purposes.
If you accidently tick the wrong box you may lose Medicare and your pension now and in the future.
You lose the Tax Threshold and pay top marginal tax rate on all income.
So what most Aussie cruisers want to be is fully fledged, tax paying Aussies on a short vacation.

Btw, you must use your Medicare card once per 5 years or is can be ripped off you.


Mark

[Sailing Soon]

I'm a CPA and most of the above is spot on. You are an Aussie resident unless you up stumps and don't intend to return. If you leave for a while but have family, or real property assets, etc then the ATO will likely still consider you a resident. You get the first $20,500 tax free (more if you're a pensioner), so tax is unlikely to be an issue if you're cruising anyway. You may even be able to claim part of your flight home to do your taxes as a deduction too.
Tax law is littered with people trying to stop being an Aussie resident for a few years to save tax. Almost all end up paying the ATO in the end.
Cheers, Peter

[bbhflts]

All very good advice. First is age. So it's good to be tax resident if you do want to utilise things like Medicare. Next is tax threshold. Then there is the consideration on what and where to put investments. It's a lot to think about especially when considering early retirement and future planning. My initial thoughts were to work from how much I expect to spend and or earn per annum cruising, and then devise on the right strategy considering double taxation treaties, citizenship, residency and domicile..... Peter, are you consulting by any chance?

[Sailing Soon]

Originally Posted by bbhflts

Peter, are you consulting by any chance?

Like everyone else on the site I'm happy just to give free advice if it t's needed. If you need help with a tax return, or with personalized financial advice with retirement modeling my firm, or loads of other firms can do much of this with you via email, or preferably (at least initially) in person.

In general terms Australia has no double taxation, but the ATO will want its share of everything earned. For example, say you cruised and invested $200,000 in VHY ETFs, paying $13,000 dividends with $3,000 franking credits inAustralia, and made $15,000 overseas ,paying $2,000 tax. The Australian tax return would need to include all income, and all tax paid. In this case you'd have earned $28,000 income and paid $5,000 tax.
On $28,000 an Australian resident would have to pay about $1,000 tax, but seeing as $5,000 tax had been paid you'd get a refund, not $4,000 refund on the total, but just on the $3,000 on the Aussie portion.
If you'd earned $8,000 overseas, paid no tax there, and rented your house out for $20,000 in Australia then you'd have to pay the ATO tax on the overseas portion too, so pay them $1,000 ish. Of course if you were claiming to be a non resident and rented the house out then you'd miss out on the tax free threshold and have to pay the tax in Australia at a much higher tax bracket too.

Hope this helped,

Cheers
Peter