What a difference timing makes. A recent case before the Administrative Appeals Tribunal (AAT) is a reminder about the tax impact of the
timing of employment income.
When the job ended, the taxpayer moved to Australia and became a resident. Once in Australia, the former employer
honoured the performance bonus and paid it as a series of instalments.
The dispute between the ATO and the taxpayer started when the Commissioner issued amended assessments taxing the bonus payments received.
The dispute focused on when the bonus was derived. Had the bonus been derived while the taxpayer was still a non-resident then it would not
have been taxed in Australia.
This is because non-residents are normally only taxed in Australia on Australian sourced income. Employment income is typically sourced
in the place where the work is performed (although there can be exceptions to this).
Australian tax case law says that employment income is normally derived on receipt. In the taxpayer’s case, this was when he received the
payments from his former employer, not when he became entitled to the bonus. Because the taxpayer received the bonus when he was a tax
resident of Australia, the bonus was subject to tax.
The difference for the taxpayer was quite dramatic. Had he been paid the bonus when it was due, he would have paid no
tax as Kuwait does not impose income tax.
Please call us if you are concerned about tax residency or managing overseas income. We want our people to be the best they can be.
Darren and Jenny have one child and are planning for his secondary education at a Melbourne private school. Utilising education bonds, they aim to ensure they have sufficient funds to cover all tuition fees and associated costs throughout his education.
As Australia's highest marginal tax bracket impacts more individuals, a growing number of Australians face rising tax obligations due to "bracket creep," where wage growth outpaces tax rate adjustments. This trend is expected to persist, with tax-efficient strategies the backbone for financial advice to help individuals secure long-term wealth.
As Australia's highest marginal tax bracket impacts more individuals, a growing number of Australians face rising tax obligations due to "bracket creep," where wage growth outpaces tax rate adjustments. This trend is expected to persist, with tax-efficient strategies the backbone for financial advice to help individuals secure long-term wealth.
Discover 9 essential financial planning tips to help new and expecting parents manage the costs of parenthood with confidence and ease.
The Taxable Payments Annual Report (TPAR) is a mandatory report for Australian businesses in certain industries to disclose contractor payments to the ATO by August 28 each year, ensuring accurate tax reporting.