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| Local taxes | |
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| Topic Started: Aug 16 2010, 05:28:41 PM (330 Views) | |
| mamkai | Aug 16 2010, 05:28:41 PM Post #1 |
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True Blue Mate
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I keep hijacking other threads, but should probably just start my own : ) We just received my husband's first pay stub and I have some questions. Have local taxes (Victoria) already been taken out? Do we pay them at the end of the year? Is is not clear from his pay stub. Also, I have read a decent amount on the ATO website (still confused :mrgreen:, of course) and it seems that here in Australia you aren't given the option to take ten million deductions/credits like in the US. So, does this mean that we are not likely to owe at the end of the year? Have they already factored in anything major that would affect our tax rate? If not, what can I expect at the end of the year. I'm curious to know whether or not we will owe taxes. The amount taken from his paycheck seems consistent with what I *think* our tax rate will be, but I had added in some extra for local Victorian taxes. Just to clarify, who actually pays for LAFHA. I thought it was a reduction in taxes form the government, but as I dig through threads it looks like the employer might pay. We didn't sort this out beforehand, thinking we wouldn't be eligible. Now it looks like we might be eligible. The HR rep is hopelessly incompetent and VERY slow at finding answers and getting back to us. I'm wondering if I should push this or just let it go. Such an exciting topic. |
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| SanDiablo | Aug 16 2010, 08:29:44 PM Post #2 |
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True Blue Mate
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No one pays for LAFHA, it's just a way of not taxing a portion of your income. It can look really odd on a paystub. Basically, they take out an allowance, then calculate your tax, then add the allowance back in, so it simply reduces your taxable income. If your employer doesn't know how to set it up, you can have an accountant do it for you, as long as your employer is willing to do it. It is no skin off your employer's back, but it does involve some accounting on their part. It doesn't cost them anything. There are no state taxes. I think most average people get a refund, but it won't be huge. The tax rates are pretty close to what you owe. And not too many fancy deductions, unless you own a business or do some slick investing out of your super. The online tax filing system is super easy, but if you want reassurances, it's not a bad idea to hire a professional for the first year. A basic retunr costs about $120. EDITED TO ADD DISCLAIMER AFTER READING ANOTHER ONE OF MARILYN'S EXCELLENT POSTS: Sorry, that was how our LAFHA worked. There wasn't any extra money...just a tax loophole. No Fringe Benefit Tax. Edited by SanDiablo, Aug 16 2010, 08:44:24 PM.
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| sheowahya | Aug 16 2010, 09:29:57 PM Post #3 |
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True Blue Mate
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If your husband has received a proper pay stub, then it is required to show the gross wage paid, the amount of tax withheld, and if eligible, the amount of super that is to be contributed to his super fund. The withholding rates are calculated to reflect the tax calculation on gross wage ONLY. It does not include the medicare levy or the medicare levy surcharge (if you are subject to it). The standard withholding rate does not cover any other income, so if you have substantial interest income, dividend income, rental income, etc you could receive a sizeable tax bill at the end of the year. There is no such thing as "local" payroll taxes here. The only payroll tax is federal tax. Local taxes are council rates and water rates, but you pay those directly to the council and water board and only if you own real estate. LAFHA is paid by your employer to help offset the added expenses of maintaining 2 residences. As I said in your other post, some LAFHA is subject to FBT and some is not. If your LAFHA is subject to FBT then it will NOT be included in your taxable income, if it is NOT subject to FBT then it WILL be included in your taxable income. By all means, keep on top of this. You only get one chance to get this right. You're starting at the best time of the year as it is still early and you have the best chances to avoid any unpleasant tax surprises by getting the answers to your questions now and making sure everything is in place correctly. Trust me, you do NOT want to find out next August that you got this wrong. Cheers, Marilyn |
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My Timeline ======= Category 136 BN - Skilled Independent. Skills Assessment: Applied ICAA: 13May05 Addtional Classes Required: 08Aug05 Re-submitted PASA: 05Feb07 Approved as Accountant 2211-11: 26Feb07 Main Visa Application: Sent to ASPC: 12Mar07 Application received: 16Mar07 Acknowledgement received: 10May07 Credit Card Charged: 10May07 CO assigned: TBD Medicals sent UNrequested: 26Jul07 PPC sent UNrequested: 18Jul07 VISA Approved: 07Nov07 Main move to Australia: 17Apr08 | |
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| mamkai | Aug 18 2010, 02:14:10 PM Post #4 |
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True Blue Mate
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Thanks! |
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| tierneyrb | Sep 27 2010, 02:33:25 AM Post #5 |
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Chinwagger
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Just another question to add on this, do you have to maintain a home in your previous country to get the LAFHA on housing in AUS? In other words, would we have to rent our house in the US rather than sell it prior to coming to get LAFHA (the housing portion)? We are in the midst of trying to decide if it would be better to keep the house for a few years and rent it (we will be returning to the US but probably not to our house) or try to sell it now. The housing market is still bad so renting might be the right way to go...and it would be another consideration to rent if LAFHA isn't paid if you sell your residence in the US. |
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| mamkai | Sep 27 2010, 10:58:02 AM Post #6 |
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True Blue Mate
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We are still waiting to hear on LAFHA, but the first question we were asked by HR was if we sold our house in the US. Selling your home indicates that you don't plan to return. It seems that the real question is whether you are making decisions on where to live on your own, or whether it is being dictated by your employer. I don't know that selling your house is a deal breaker, but you would probably be better off keeping your house if you are leaning toward that anyway. |
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| tierneyrb | Sep 27 2010, 11:04:44 AM Post #7 |
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Chinwagger
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I hope that since it is a temporary Visa and we would be renting in AUS, not buying, maybe that would indicate that we would be returning to the US. They shouldn't expect one to maintain a house and pay mortgage as well as pay living expenses in AUS. I suppose that is the thought behind LAFHA, but I see it more as assistance in covering the difference in the cost of living. Argh. I don't want to rent the house. |
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| mamkai | Sep 27 2010, 12:44:27 PM Post #8 |
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True Blue Mate
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Well, if you don't want to rent the house, don't listen to me : ) We still do not know if selling our house is going to disqualify us, but I agree, it shouldn't matter. Someone who rents in both locations doesn't have to pay rent back home to qualify. |
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| mamkai | Sep 27 2010, 12:52:34 PM Post #9 |
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True Blue Mate
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http://www.ato.gov.au/businesses/content.asp?doc=/content/52023.htm I just found this link that clarifies it a bit, but it sounds like someone else has to determine whether or not everything lines up, and selling a house it just one thing they might use to say "the employee is not planning to return". I don't know, but if you figure something out before I do, please enlighten me. Bah! |
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| SanDiablo | Sep 27 2010, 11:52:26 PM Post #10 |
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True Blue Mate
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It is my understanding that you need to maintain a home in order to be considered to be living away from it... |
| "I'll try anything twice." | |
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| Ausson | Sep 28 2010, 12:49:07 AM Post #11 |
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True Blue Mate
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I was reading the miscellaneous ruling in the ATO database and it indicated that you didn't have to maintain a home in a geographical location for you to intend to return to that location and for you to declare that location your permanent residence. I imagine there are plenty of Poms in Sydney right now that are collecting LAFHA because they intend to return to London, and what with the expense of purchasing property in that place not many of them would have owned their property there. What does break the deal is to buy a home in the area that you have temporarily located to. See point 33 at this url with regards to maintaining residential premises in the place of residence http://law.ato.gov.au/atolaw/view.htm?docid=MTR/MT2030/NAT/ATO/00001 |
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| Ausson | Sep 28 2010, 12:51:54 AM Post #12 |
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True Blue Mate
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I've also read a few forums that indicate unscrupulous recruiters will offer LAFHA to foreign nationals and will pay them the allowance tax free, only for the foreign national to find out later that they didn't qualify or that they did something to disqualify themselves. As Marilyn suggested it is better to find out this early on in the year, but make sure you talk to someone who knows that they are doing as I recently spoke to an accountant who told me that I didn't qualify, and based on the reading of the law and of the rulings I am having a hard time understanding his logic. |
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