Taxes - Resident vs Non-Resident?

Hi I am trying to figure out what the benefits or drawbacks are with having residency in both Canada and Australia are and how this relates to our situation. Any feedback is appreciated.

I am currently planning on selling our house before we head out to Australia in 2010. Seeing as we are not sure if we will permanently live there I am thinking of possibly renting our house as opposed to selling it.

I understand that by doing so I am considered a resident of canada and as such have to complete my canadian tax returns ever year showing my rental income. The question I have is does any one know how this could potentially effect my tax situation in Australia? My understanding is that Canada and Australia have a tax treaty and assume that income earned in Canada will be taxed in Canada while income earned in Australia will be taxed in Australia.

As long as you rent that property out at arms-length (so it's not seen as your primary residence), you can only be a resident of one country at a time. If Australia considers you a resident for tax purposes under the treaty, you're a non-resident of Canada.

This means that you need to tell the payer that they have to pay you as a non-resident (i.e. withholding tax automatically goes to the government). Might be good to find a real estate agent that is good in managing this when you're abroad, to ensure that it is done properly (also, by using an agent, this also makes it "arms length").

-- Mon Dec 21, 2009 11:52 pm --

Note that in that above-mentioned scenario, you have to declare the income (after expenses) on your Australian return, but then you get a foreign tax credit on tax paid to Canada.

By Australian tax treaty -- like most tax treaties -- once you are a tax resident of OZ and your primary "life" is there, it doesn't matter what you do with the Cdn house.

Certainly if you rent it out, you will be automatically considered non-resident, but even if you don't you are fine. The "arm's length" provision is not required.

So just make sure you will be meeting all the requirements to be considered OZ tax resident -- then you can make an "unhasty" decision on your Cdn home.

Hi there wonder if someone can help please!

I am a single Australian woman returning to my home country after 24 years in Canada. I am selling my home and not planning to come back except to visit my adult children.

I receive monthly matrimonial support payments which will continue in the future and which are deposited into the BAnk of Nova Scotia which has an affiliate in South Australia where I can withdraw those funds.

Can anyone out there enlighten me on whether I have to pay the Canadian taxes on those monies still. I'm pretty sure Canada has a treaty with Australia from what I have read here. Not sure who to contact about this to get a solid answer.

Thanks everyone

Alessandra,

You would need to tell the payer that they have to pay you as a non-resident. The payer needs to withhold a certain percentage of tax - not sure what the rate would be, it depends on how this income is described in the Canada-Australia Income Tax Treaty, best to ask the CRA's International Tax Services Office. The payer would then submit this withheld tax to the government. That would be your final tax obligation to Canada on this income (i.e. no need to file a Canadian tax return if you have no other declarable income).

Not sure if you would need to declare the income in Australia. But even if you do, whatever tax was withheld for Canada can be used as a foreign tax credit.

Alimony paid to non-residnets is generally exempt from taxation in Canada,andsubject to tatxation in the country of residence.

I am a Los Angeles based Attorney and CPA practing in the area of cross-border taxes. My firm handles cross-border US-Australian tax matters. Feel free to reach me at (213) 426 – 0186 if you need assistance with your US and/or Australian tax filings. We prepare tax filings for both countries.