Overseas pensioner income test, taxed or net

I am 70 and receiving my pensioin in Malta, where I now reside. Having married last year and now with a significantly reduced (married rate) pension, I am considering doing some work to supplement our income. Currently my pension is our only income. Is the income test based on gross or net income? Maltese income tax is payable for income above euro 12,400, for a married person. How is the exchane rate taken into consideration?

8 comments

Why you got Married .... just live together .... maybe need to legally divorce and just share the home together ..... only a suggestion ... 

We got married for all the traditional reasons. Further, as my wife was non European citizen, she would have not been able to remain in Malta.

Sorry mate my appologies ..... is ok if you are happy no worries.

For the exchange rate check ................. http://www.xe.com/currencyconverter/ 

Thank you. I am aware of the exchange rate fluctuations.

Under the Malta/ Australian Social Service Agreement you will be paid the married rate basic Australian pension less $ for $ for any pension you collect in Malta.  You can earn up to the maltese equivalant of $A164 per fortnight before your Australian pension is effected.

Thank you. Yes I am aware of that. My question is: Is the income amount considered pre or after local tax, either in Auistralia or abroad? For example, if I was to earn $20,000 per annum in Australia, I would pay some tax. Is the pension reduced by the pre tax amount or the net amount.

Mate,

Another point to consider is that ATO will consider you as foreing resident and they will hit you with taxes ...... so be aware when you put your tax return next time.

I have been advice this by the Commonwealth bank when I change my address .

The bank I think have to advice ATO of change of addresses if they are overseas ???? not sure on this ??? maybe is good if you check it out so you do not get any surprices in July.

Hi Gozitano,  You have got me with that question.  It is one I have never come across.  Bear in mind that if you were to pay tax on income in Malta & hold a Maltese Bank A/C, separate to your Centrelink A/C, there is no way that Centrelink could ever be aware if you didn't tell them.  The legal answer to your question would be, I think, the pension reduction based on the net income after tax.  If you go down this street, get some accounting advise in Malta.  You need to be careful that you are not up for tax in both Countries.

Yeahhh whatch out innes is rigth ..... must consult accountats both sites Malta and AU.

Thank you for all the input. First of all, if I did receive an income here, I would do my utmost to reduce tax, (tax free allowances etc) but I would declare the net income to Centrelink. I am not so naive to think that this site is not monitored.

The tax free amount here is quite generous as it is in Australia, but I would need to continue with some pension entitlement so that the original conditions apply if and when I stop work again.

Centrelink will use their exchange rates for any foreign income that you receive. You have to declare the gross income.  Your pension will be affected by the lifetime residency rules. If you have had 35 years of residency in Australia then your current pension will not change. If you have accrued less than 35 years then you will be paid on a pro-rata basis, after 6 months ( currently this period is under review).  Example 25 years residency will equate to 25/35 of your pension amount.  According to EU rules if you are resident in Malta then your worldwide income is taxable according to the tax rules in Malta.  That will include any foreign income that your receive, such as the Australian pension, interest on bank accounts and any dividends from shares.  Being married of course may affect your Australian pension.

You need to inform your bank and any share registry in Australia of your non-resident status.  Bank interest for non-residents is taxed at 10% (flat)and dividends from shares at 15%(flat). These are final taxes in Australia. Also if you have Australian shares then once you have become a non-resident of Australia then the ATO deem that you have sold the shares and any capital gains tax (CGT) will need to be paid. However this can be deferred until you actually sell the shares or again become a resident of Australia .  Bear in mind if you defer payment of any CGT then future CGT will apply from the original date that you purchased the shares and not from the date you ceased to be a resident of Australia.

Australia has a Double Tax Agreement (DTA) with many countries. Check to see if a DTA exist between Australia and Malta. If it does then any tax on income from  say bank accounts or dividends can be offset against the Maltese tax rates. Usually the offset cannot be greater than the tax rate applied in Malta. Example: bank interest in Australia is taxed at 10% for non-residents. If your marginal tax rate in Malta is 15% then you may be entitled to an offset of 10%. If our marginal tax rate is below 10% then it is likely there will be no reduction for tax paid in Australia.

Check with the tax auhtorities in Malta or your tax advisor.

My last sentence I need to clarify. If the tax rate in Malta is less than 10% let's say 8% then the maximum offset applicable for tax already paid in Australia is 8%. 

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