Expat US Tax Blogs

What are the Contribution Rules for an RPP?

Under an RPP, your employer will send contributions on your behalf. If you want to contribute as well, make the necessary arrangements with your employer to deduct the amount from your paycheck.

Who Manages an RPP?

The financial institution your employer works with will manage the plan. That bank will work with several in-house and third-party administrators, trust companies, investment managers, and consultants.

Single-Employer Registered Pension Plans

Under a single employer pension plan (SEPP), a stand-alone employer, or a cluster of employers housed under the same corporate banner engage in and contribute to the same pension plan. A SEPP may be structured as a defined contribution plan, a defined benefit plan, or as a hybrid of both styles. SEPPs require the employers to make contributions to the plan and they must also cover any shortfalls.

Multi-Employer Registered Pension Plans

Under a multi-employer pension plan (MEPPs), two or more autonomous employers contribute to the same pension fund, which may either be a defined contribution plan, a defined benefit plan, or a hybrid model.

The pension recipients’ benefits under a defined benefit MEPP is calculated by the years of membership with the existing employer and time spent with previous employers.

What tax do you pay on an RPP?

A Registered Pension Plan is both a tax-deductible way to save and a tax-deferred way to invest.

The money that you or your employer/sponsor contribute to your RPP is tax-deductible, so you’ll save more of your income. This means you won’t pay taxes on the money you contribute.

Additionally, you won’t pay tax on your RPP investment earnings until you withdraw them from the plan. During retirement, your income is typically lower than it is during your peak working years. So by withdrawing later, you’ll most likely pay a lower tax rate.

What Happens to your RPP if You Leave Your Employer?

Most provinces in Canada uphold a law that says plan members are entitled to receive the benefits of both theirs and their employer’s contributions if they leave the company. However, there are some provinces that lack this law, and your employer may require you to work there or be a member of the pension plan for a period of time before you become vested. If you leave before that time period is up, you’ll keep your own contributions, but you’ll lose the portion your employer contributed.

When you leave your employer, there are a few options for managing your pension assets:

Leave your assets in the plan.
Transfer the value to another pension plan (if you’re joining one that allows transfers).
Transfer the value to a Registered Retirement Savings Plan or other plan.
Take the cash value.

RPP v RRSP

The largest difference between RPP and RRSP accounts is that an RPP is an employer-based account and the RRSP is an individual account. An RPP is managed by a financial service provider chosen by the employer, while investors in an RRSP choose their own provider and plans. RRSP are useful retirement tools because you have complete control over who holds the money and how it’s invested.

	Registered pension plan (RPP)	Registered retirement savings plan (RRSP)	Tax-free savings account (TFSA)
What is it for?	Retirement savings.	Retirement savings or other long-term expenses.	Anything.
Who contributes?	The employer is required to contribute and the employee can choose to contribute.	The employer can choose to contribute and the employee contributions can be voluntary or required.	Only the employee can choose to contribute.
How do taxes work?	Contributions are tax-deductible and gains are exempt from taxes until payout. Employer contributions are exempt from payroll taxes.	Employer contributions are taxable income.	Money isn’t subject to taxes going in or coming out.
What if you leave the company?	Depending on your province’s legislation, you can keep all the contributions.	You get to keep all of the contributions.	You get to keep all of your contributions, and employer contributions aren’t usually a factor.
When can you withdraw your money?	Depending on your plan, you might be able to withdraw from the amount you’ve voluntarily contributed, but not from your required contributions.	The employer might have restrictions in place as to when you can make withdrawals.	Anytime.

Which plan is best for you is entirely dependent on your situation. If your employer is willing to match your retirement contributions, you should absolutely open an RPP for monetary gains. If you aren’t employed full-time, you’ll have to open an RRSP or another non-employer-based savings account.

Contribution Limits for Defined Contribution Plans and Defined Benefit Plans

Year	Defined Contribution Yearly Contribution Limit	Defined Benefit Yearly Payout Limit	RRSP Contribution Limit	Year’s Maximum Pensionable Earnings
2021	Unavailable at this time	1/9 the defined contribution limit	$27,830	Unavailable at this time
2020	$27,830	$3,092.22	$27,230	$58,700
2019	$27,230	$3,025.56	$26,500	$57,400
2018	$26,500	$2,944.44	$26,230	$55,900

November 25 2022

Will I pay Australian taxes on profits from selling shares?

Investing in shares is a great way to make your money work for you — by passively building your net wealth and making additional income from dividends and capital gains. But the income that you make from your investments is still considered taxable by the Australian Tax Office, and you’ll be required to pay tax on the earnings that you make.

Taxable income includes things such as wages, self-employment income, business profits, rent from investment property, interest – and yep, even income received from investments like dividends, capital gains on assets, and other distributions.

Dividends

A dividend is what is paid out when a company distributes its earned profits to its shareholders. The rate or amount of dividends to be paid is generally decided by the company’s board of directors and is usually paid out quarterly – but every company is different. Paying dividends is the company’s way of saying ‘thank you’ or rewarding shareholders for investing in their business.

The way that your dividends are taxed depends on a few things:
– your residency status in Australia
– your tax bracket (so all of your other taxable income comes into play here as well)
– and whether or not the dividends are franked or unfranked

The tax rate on dividends usually falls between 20-30%, depending on the above circumstances. But, Australian residents are taxed under a system called imputation.

Dividend imputation is a system that eliminates the problem of company profits being taxed twice.

If a company pays tax on the income when it is paid out, and then the payment is received by a shareholder who also pays tax on the same income – this is where double taxation happens to dividends.

To avoid this, Australian companies are allowed to issue what is known as franked dividends to its shareholders – which are dividends issued from after-tax profit. So the shareholder receives their dividend, and a franking credit. These franking credits represent the fact that the company has already paid tax on that income.

Dividends can either be fully franked, partly franked, or unfranked. A partly franked dividend means that only some of the tax has been paid on it, and that the shareholder will hold the responsibility to pay the remainder.

Unfranked dividends indicate that no tax has been paid on them – so you will need to take these into account while lodging your tax returns, and pay attention to what the franking status of your dividends are.

If you receive an excess of franking credits, you may be even able to claim a tax refund on them, as you will have exceeded the tax you had to pay. Most of this information is tracked and auto-filled by the company into the ATO—but you should always double check your own numbers against the auto-fill and keep all relevant records should something be off.

I want to know more about US taxes abroad

Capital Gains Tax on Shares

Capital gains tax (CGT) is the tax that you pay on profits you’ve received from selling assets such as shares. Capital gains are calculated from any net gain in income you have made on an asset – usually produced by buying low and selling high.

For example, if you bought $1000 worth of shares, and sold them for $3000 – you’ve made a net gain of $2000. This gain must be added and accounted for when you declare your taxable income. This tax not only applies to sold shares, but also other investments such as property or cryptocurrency.

You will have to pay tax on any of these gains at the same rate as your individual income tax rate.

CGT does not apply to dividends, as these are taxed as ordinary income. Nor does it apply to profits from shares if you are in the business of share trading, as this will be taxed as ordinary business income rather than capital gains.

You will need to keep good records of your shares and be able to identify:
– which shares you’ve sold
– when you acquired them
– when you sold them
– purchase price
– sale price
– commissions paid to brokers when you buy or sell

Most of these records will be provided to you by the company or your stockbroker. But it’s important that you keep a close eye on them, and make sure that all the details are up to date and correct.

The Australian government holds an interest in making sure that you hold your assets for an extended period of time, because of this you may be able to reduce your CGT by 50% if you’ve owned the asset for at least a year (and if you’re an Australian resident for tax purposes).

You can also lower the amount of CGT you must pay by declaring any capital losses you have had. A capital loss is the opposite of a capital gain – so if you invested the same $1000 into shares, and only sold them for $500, your net loss would be $500.

You can then use this loss to offset any gains you made and reduce the amount of CGT you’ll be required to pay. Though, keep in mind that this loss cannot be used to reduce any other income you made, such as your wages.

But what about if your investment has increased, but you haven’t sold it or done anything further with it? There are certain advantages to letting your investments sit – a big one being, the ATO doesn’t tax unrealised gains. You’re only subject to capital gains tax when the investment is sold.

While the ATO pre-fills a lot of information, it does not know about profits made from things like capital gains, cryptocurrency, or sole trader profits. If this information is missing, you will need to refer to your own records and enter it yourself. This is why it’s important to keep track of your investments and make a habit of good record-keeping to stay out of trouble with the ATO.

Investments and shares can make tax obligations a little more complicated than a standard tax return, especially if you’re dealing with a large amount of money or multiple investments and moving parts. An accountant or tax professional will be able to help you understand these things a bit better, and also help you make calculated decisions that will be the most beneficial for your financial future.

November 23 2022

Pre 2000 education debts australia

The History of HECS

In the early 70’s, the Australian government abolished university fees in order to make higher education more accessible to working class Australians. These reforms provided opportunities to citizens who otherwise would not have been able to access a university level tertiary education. Citizens were able to attend university without the burden of tuition and fees, and the education they received allowed them to expand their employment opportunities.

But by the late 80’s, the Australian government slowly started to re-introduce the idea of paying for tertiary study, and so began the Higher Education Contributions Scheme (HECS). The first iteration of the scheme charged university students an upfront fee of $1800, and the government would then pay the rest – allowing students to defer the initial tuition fees and repay their HECS debt through the taxation office once they earned over a certain amount of income.

The function of HECS loans has grown and evolved over the years, by introducing new functions such as different tiers of repayments depending on the perceived value of the degree that the student was working towards. The HECS-HELP scheme has also expanded to include loans and financial aid for students studying certain VET level qualifications.

I want to know more about US taxes abroad

How HECS Works Today

Pre-2005 education debt is called HECS, while post-2005 debts are called HECS-HELP.

On receiving a HECS-HELP loan, the student pays no upfront costs to the university. The government pays the tuition amount directly to the university on behalf of the individual, and the individual then makes repayments based on a certain percentage of their income, depending on how much income they earn.

In 2021 alone, there were 2.9 million Australians with an outstanding HELP/HECS debt. Though 64% of Australians have never had any student debt – this is probably largely due to the number of citizens who were able to take advantage of the time when university fees were abolished. Those in the ‘baby boomer’ generation have an average of $930 in outstanding fees, compared to their Gen Y and Gen Z counterparts who hold an average of $16,000-17,250.

But these days, the average Australian has a HECS debt of $23,685 as of 2022 (as opposed to the average in 2012 being only $15,191). Many fall under the average, and many have a looming debt that is much higher. But whether you finished your higher education this year, or twenty years ago – it doesn’t change the fact that the Australian government requires you to repay the debt.

There once used to be discounts for voluntary repayments made on any pre-2005 HECS debts, but this was slowly reduced over the years, and was then eventually abolished all together as of the 1st of January 2017.

Before 2017, overseas earnings were not counted towards HECS repayment income levels either. This meant that Australian citizens living overseas did not have to make contributions to their HECS debt while they were outside of the country. This has changed now, so if you have an outstanding HECS-HELP debt and you live and earn money overseas, it may be a good idea to get in touch with the ATO to avoid any fines or penalties.

The amount you have to repay each year is not based on the amount outstanding on the loan, but on your rate of income. If you earn over the threshold ($48,361 for the 22-23 financial year) you will be required to make a contribution to your loan. The repayment rate starts at only 1% and continues to rise as your taxable income does – maxing out at 10%.

These loans are all interest-free, so you do not incur any further fees if you’re not able or not required to make repayments due to your income level. Even though there is no interest incurred, these outstanding loans are indexed every year by the Consumer Price Index (CPI), so that the debt maintains its real value – so the total you owe may fluctuate because of this.

Can Your Old HECS Debt Be Cancelled?

Since the introduction of the Higher Education Contributions Scheme in 1989, over 2 million people have fully repaid their debts, and over 18,594 loans have been written off due to the death of the loan holder. Unfortunately, this is one of the only times that an education debt is wiped completely without repayments. There are certain schemes and payment plans to help HECS debt holders experiencing financial hardship, but there are very few circumstances in which the government will fully forgive the debt. You may cancel your HELP debt if you meet what the government calls ‘Special Circumstances’.

To meet these special circumstances, you will need to provide supporting documentation within 12 months of your withdrawal date from the unit/s. You will also need to prove that what affected you was:
– beyond your control
– didn’t make the full impact until on or after the census date
– made it not practicable for you to complete the units

The government will not approve your application for cancellation if you had completed the units successfully, or if you withdrew from the units simply because you changed your mind. The special circumstances must have affected your life in a way that made completing the units of study unreasonable.

When a person with outstanding HECS debt passes away, the repayment included on their income tax notice that relates to the period before the death must be paid, but the rest of the outstanding debt will be wiped and forgiven. HECS debts do not pass on to next of kin or the family of the deceased, and the remainder is cancelled once a loan-holder passes.

So even if you were not around in the times of free university education in Australia, there are still programs in place to help you obtain a higher level of education if you so wish to get it. For anyone who completed their studies pre-2005, things may have changed when it comes to your obligations and status of your outstanding education debts. But if you’re struggling financially, there are avenues to take that will help ease the burden of your education debt, but the fact remains that there are very few circumstances that will get you out of repaying your HECS loan.

November 21 2022

Why is my Australian tax return so low?

While tax time isn’t exactly the most exciting time of the year, everyone looks forward to that little boost in their bank accounts from their tax refunds. Maybe they can plan a holiday, fix their car, catch up on bills, or throw it all on their savings accounts. Those plans can easily be thrown out of the window when we find less than expected in the bank when we get our payment from the ATO. There are many reasons why your tax return can be lower than expected, so we’ve listed a few for you to look out for.

But first of all…

How do tax refunds work in Australia?

In Australia, our tax is deducted straight from our paycheck by our employer. But the government does not take into account any work expenses that we may incur throughout the financial year. So, at the end of the day, they are taxing you for more than you actually earn. By filing/lodging our tax return each year, we are telling the government about the expenses that we have had to pay for our work. Then the ATO is able to take your original income, deduct your work expenses from it, and recalculate how much tax you should have paid. Often after these deductions are taken into account and recalculated, we have overpaid our taxes – this is where we get our refunds from.

So, why was your tax return so low?

1. You got a pay raise/your income increased.

Congratulations! You got a pay raise, or your income increased in other ways, throughout the financial year – which is always a good thing. But the more that you earn, the higher the rate of tax that you are required to pay. So, the increase of income may have bumped you into a higher tax bracket, meaning you owe more tax, and you get less on your refund.

How to avoid this next financial year:
There’s not much you can do to get around being bumped into a higher tax bracket. But if you’re looking to maximize your refund, be sure to track all of your work expenses and get a good accountant to help you avoid any mistakes on your tax documents.

I want to know more about US taxes abroad

2. Second job/side income increasing your taxable income.

Unlike those in traditional employment who have an employer taking out their tax each week for them, sole traders and side hustlers may not realize that they need to pay tax on their second job. Things like Uber, Airbnb, and Fiverr income are not excluded from being taxed – so if you’re doing these things on the side, you may need to account for the extra tax you will need to pay.

How to avoid this next financial year:
If your sole trader business or side hustle is making you a decent income, it may be time to start setting aside a percentage of your earnings from these gigs every time that you are paid. The recommended figure to save for tax is 30-40%, but a tax expert or accountant can help you figure this out more accurately, and help you avoid a bill from the ATO come tax time.

3. Employer not withholding enough from your wage.

There can be situations where an employer is not withholding enough from your weekly wage to cover the tax you will owe. This can be either a simple mistake within payroll, a missed bonus, or overtime that has pushed you into a higher tax bracket. While there is nothing you can do to remedy this after the financial year has ended, it is something that you can keep an eye on for the following years to come.

How to avoid this next financial year:
Ask your employer to adjust your weekly tax deductions/withholding as necessary. A simple heads up to the payroll team may be all it takes to ensure that you are not underpaying.

4. Existing government debt.

Existing government debts are paid automatically out of your tax return money, and the remaining is deposited into your bank account. So, if you have outstanding fees owed to government agencies (Centrelink, ATO, family assistance, etc.), your refund will be used to pay off this debt. The ATO and all other government agencies communicate when it comes to tax refunds, and they often get first shot at your refund if you are in their debt.

How to avoid this next financial year:
It’s important to know what debts you have and keep track of money you may owe. If you’re in the position to pay these off throughout the year, you will be better off come tax time.

5. You’ve claimed the tax-free threshold for two or more jobs

For Australian residents, the first $18,200 of income is not taxed. When you fill out your tax file declaration at the beginning of any new employment, you have the option to claim the tax-free threshold on the income from this job. If you have more than one job and have tried to claim the tax-free threshold on both forms, the first $18,200 from both jobs will have been calculated as tax free – and you will not have paid enough tax for how much income you have earned throughout the financial year.

This can result in a much smaller refund, and in some cases – a tax bill from the ATO.

How to avoid this next financial year:
You may need to speak to your employer and adjust your tax declaration forms if you work two or more jobs. Make sure that you are only claiming the tax-free threshold for one, usually, it is best to claim the threshold on your highest income source.

6. Mistakes made on tax return

It can be easy to make errors, or accidentally overlook mistakes, made on your tax forms. This can include failing to declare taxable/assessable income (such as bonuses, allowances, bank interest, foreign income), or claiming deductions which you are not eligible for. Certain deductions can also be rejected by the ATO if you lack the documents or evidence to support these deductions. Because of this, the ATO may amend these claims and as a result, reduce your expenses and raise your tax debt, and end up lowering the return you receive.

How to avoid this next financial year:
Keep an eye out for common sources of income that people leave off their tax return forms, such as: bank interest earnings, allowances or bonuses, dividends, foreign income, side income, or government payments (Youth Allowance, Newstart, etc.).

Double check both your income and your expenses, and keep track of anything you are looking to claim as a deduction on your tax return.

It’s good practice to not expect your refund to be the same each year. Small changes in income or circumstances can alter your tax obligations drastically. As a whole, the ATO has reported that the amount of money received by residents in their tax returns have been between 8-10% lower than previous years. There have also been updates in tax withholding standards which leave employees with slightly bigger paychecks, but lower tax returns.

A good accountant can help you navigate these issues, avoid any nasty surprises or bills from the ATO, and help you get the most from your tax return.

October 14 2022

What is the fastest way to immigrate to Canada?

Canada offers several programs for immigrants that lead up to obtaining citizenship. The most popular program for those who wish to immigrate and live permanently in Canada is the Skilled Worker Program (SWP). The Canadian immigration system is fair, impartial, and efficient. As an applicant, you should know what to expect from the process to plan accordingly.

Immigration points system and your chances of becoming a Permanent Resident

Canada’s points system for immigration is based on many factors. You could receive 20 points for a job offer from an employer or 15 points for having a sibling who lives in Canada. The government also grants 10 points for completing the Canadian Language Benchmark exam. The number of points you need to become a permanent resident will depend on how many points you have so far. If you have more than 67, then you are eligible to apply for citizenship and live in Canada permanently.

The eligibility of candidates is determined in terms of Comprehensive Ranking System (CRS) scores. The score considers the already mentioned factors and weighs each of them in the following categories:

Core/Human Capital factors – You are allotted scores based on your age, educational qualifications (equated against Canadian levels), language assessment, and Canadian work experience.
Spouse factors – If you have an accompanying spouse, they will be scored for each of the abovementioned factors. Canada promotes the idea that couples apply together and get higher CRS scores.
Skill transferability – Your education credentials and work experience are weighted compared to the domestic requirements in Canada.
Additional points include extra scores for your application if you have a provincial nomination, job offer, Canadian education, Canadian family members, or French language proficiency.

Fastest ways to immigrate to Canada

Immigrating to Canada can be a daunting process. There are many rules, steps, and processes to consider before deciding to move. We list out the fastest ways for you to immigrate to Canada:

Express Entry (EE)
Provincial Nomination Programs (PNP)
Business Immigration
Sponsorship

1. Express Entry

The Express Entry system is Canada’s fastest, newest, and most popular immigration program. With a high selection rate, it has been designed to be more efficient and faster than the previous system. Express Entry is a points-based system (Comprehensive Ranking System or CRS) that awards applicants who can demonstrate they have the skills and experience deemed valuable by the Canadian government. The following streams within Express Entry system are going to invite close to 240,000 individuals looking to immigrate to Canada:

Federal Skilled Worker Program – Individuals who received their education qualifications and work experience (at least one year) in a foreign country can apply under this stream. The candidates must have work experience in management, technical or professional roles. Management roles (NOC – 0) include restaurant managers, shore captains, and mining managers. Professional jobs (NOC – A) like doctors, dentists, and architects are preferred. Technical jobs (NOC – B) include those of electricians, plumbers, and chefs. All these roles are covered under National Occupation Codes (NOC) 0, A, and B.
Federal Skilled Trades Program – Individuals who may not have a specific education qualification but may be skilled at their trade qualify under this stream. They need to have at least two years of experience. Work experience with NOC – B is preferred. You do need to have a job offer from a Canadian employer.
Canadian Experience Class – Individuals who already may have a work permit and have worked for at least one year in Canada. NOC – 0, A, and B are eligible.

Once a case is picked up from the pool basis of its score merits, they are invited to apply (ITA). The cost to immigrate via the Express Entry system is about $2,300 CAD for an individual.

2. Provincial Nominee Programs Canada

Provincial Nominee Programs (PNPs) are another fast and efficient way to immigrate to Canada. Canada welcomes around 84,000 new immigrants via the PNPs. Canadian provinces and territories offer these programs to attract skilled workers, skilled tradespeople, and international students. The federal government has laid down a point system for assessing applicants to make the selection process fair regarding education, work experience, or other factors.

The provincial government can select immigrant applications per their local needs through a Provincial Nomination Program. These programs can lead to a Permanent Residency or PR status for the applicant. The benefits of a PNP over federal programs are:

Most of the time, the Comprehensive Ranking System or CRS scores are much lower than those of federal programs.
Applicants not eligible to meet the minimum criteria to qualify under the federal program can still be considered via PNP Canada.
As each province has distinct requirements, selection varies depending on the applicant’s situation and background.

Being an applicant living outside of Canada, you should consider the following PNP programs:

Alberta Immigrant Nominee Program (AINP)
Nova Scotia Nominee Program (NSNP)
Ontario Immigrant Nominee Program (OINP)
Saskatchewan Immigrant Nominee Program (SINP)

I want to know more about US taxes abroad

Business Immigration

The Canadian government issues Canada Business Visa to drive Canada’s economic growth and create new job opportunities for Canadians. These visas come with special incentives: low taxes and operation costs, access to business consultants, international networking and business expansion, permanent residency, social benefits, and more. As an entrepreneur, there are endless unique business opportunities for you and your family in Canada. Below is an introduction to each of the Canada business visas available to you:

The Start-Up Visa
Self-Employed Persons Program

The Start-Up Visa

Canada’s Start-Up Visa is aimed at business owners or part-owners with at least 3 years of experience in running a successful business. This Canadian business visa does not have minimum investment and net worth requirements, but you do need to have settlement funds. If you qualify for the Start-Up visa, you can live anywhere in Canada, become a PR, and eventually apply for Canadian citizenship.

Self-Employed Persons Program

Canada has created a self-employed program that might be right for you. It is aimed at people who want to immigrate to Canada as self-employed and will allow the freedom of being your own boss! You ought to have two years of relevant experience, prove your intent to become self-employed in Canada, and meet other requirements. If you qualify, you’ll be able to become a permanent resident with the ability to bring your family with you.

4. Sponsorship (Inland or Outland)

Going by its literal meaning, “Inland Sponsorship” means that the person applying for the visa must be present in Canada when they apply. Further, the spouse, partner, or family member is already present in Canada as a temporary resident. They could have a visitor, student, or work visa. For inland sponsorship, the applicant can apply for an “Open work permit” as soon as they submit their PR application. Hence the applicant can stay with their citizen or PR family member and legally work in Canada for 12 months. This period coincides with the average inland sponsorship processing times.

“Outland sponsorship” pertains to an application for PR submitted by a person who resides outside Canada. They receive sponsorship from a Canadian citizen or PR. Suppose the applicant wants to visit their family in Canada. They will need to apply separately for a visitor visa. This in no way affects the outland sponsorship processing times. If they visit Canada, they are not entitled to work until their status changes to permanent resident status.

Is there a maximum age for immigration to Canada?

None of the immigration programs introduced by the government of Canada have a minimum or a maximum age for application. However, in the immigration pathways related to economic migration, an applicant can receive a maximum of 25 to 30 points for their age. Although older applicants will receive lower points for their age, they can certainly compensate for the same with more work experience. They can boost their points tally through:

high scores in language proficiency tests
present connections to close family members already residing in Canada as citizens or PR
Higher scores for their higher education
Last but not least, a job offer from a Canadian employer

Moreover, if you are applying to immigrate to Canada on humanitarian grounds, as a refugee, or with family sponsorship, you do not need to go through the ranking system. Hence age is never an issue in such cases.

October 6 2022

Is migrating to Canada worth it?

Over the years, the influx of large numbers of immigrants has made Canada one of the world’s most diverse countries and celebrates multiculturalism. It also offers immigrants a welcoming environment and many benefits other countries might not offer. The government has continued to bolster policies that support immigration. Canada is also known for its healthcare system, which covers most expenses, making healthcare affordable for all residents. The country is safe to live in thanks to one of the world’s lowest rates of gun violence and is also known as a sanctuary state.

Should you immigrate from your home country?

Shifting lock, stock and barrel to a different country from your own is not at all easy. And life in Canada is not about dodging polar bears as you ski your way to work. Saying “sorry” to everyone for no fault of your own and carrying Tim’s coffee is an “in” thing, though. Everyone has their personal and financial situation, accompanied by career and personal goals. We try to highlight the best and not-so-best parts of life in Canada.

To immigrate or not is a personal question. You may not like everything about your own country or any other country. Life is short. It makes sense to spend a part of it to settle in Canada if you choose to immigrate. Canada invites immigrants to find a promising careers, have decent earnings, and create a bright future for their families. As you land here, you make some good friends. You can have a work-life balance in Canada, depending on your definition of success. The country provides you with a safe, clean, cultured place to bring up your future generations. A country where the government thinks about its residents and citizens. World-class health care and education system is almost freely available to all. Immigrants don’t need to save money for their kids’ primary and secondary education, and emergency treatments.

Why choose Canada?

The Canadian economy is expanding at a rapid pace. Both public and private sectors are performing well in several sectors, and there is a constant need for a talented workforce. The local talent availability is not able to bridge the talent shortage. The Federal Express Entry Program and aligned Provincial Nomination Programs are the Canadian government’s resolve to make up for the growing domestic demand for a talented workforce.

Canada is a country rich in natural resources, culture, and diversity. The country is the third largest in the world in land mass and has just over 36 million people. The three biggest virtues the Canadian society offers its new immigrants are – an excellent public health care system, high quality of living, and the lowest crime rates. These reasons make Canada your first choice. The immigration process can be long and complicated, however, you can overcome it quickly by learning about the Canadian immigration system before you apply.

The benefits of Canadian citizenship or permanent residency

Canada provides a sense of belonging to people who migrate there. It also offers a high standard of living and a quality education system. Canada offers an environment where people are free to practice their religion without fear or persecution, attracting many people who have faced religious persecution in their home countries. Canada welcomes immigrants from all over the world, and it does not discriminate against them based on their race, ethnicity, or religion.

Ten reasons why immigrating to Canada is worth it

Migrating to Canada is a great opportunity to start anew. There are many reasons why it may be worth it for you and your family. Canada’s multicultural society and high quality of life make the country a perfect place for immigrants. However, deciding to move from one country to another can be challenging. Here are 10 reasons why you should consider taking the leap of faith and making your move into the Canadian lifestyle!

Canada is one of the most resilient economies in the world, with the most stable political environment
Canada boasts of low crime rates, making it one of the safest places to live
The quality of life is high, and medical care is primarily free and readily available
Canadians are some of the nicest people you will ever meet
Canada has an easy immigration process with low fees and the least waiting time
Canada is home to people from diverse cultures and beliefs
Canada has a wide variety of natural beauty, including thousands of lakes, mountains, and the tremendous Canadian countryside
Canada has plenty of job opportunities for immigrants, especially those in skilled trades
Canada has diverse seasons, you experience widely varying temperatures throughout the year
It is one of the most developed countries in the world and ranks first in quality of life, according to the United Nations’ Human Development Index.

I want to know more about US taxes abroad

What you should know before you migrate to Canada

Migrating to Canada is a big decision, but it doesn’t have to be difficult. If you’re considering moving to Canada, you will want to prepare for the move by ensuring you have all the documents and information you need. The Canadian government has created a website that helps make this process easier. They have provided detailed information on how to immigrate, which documents are needed, and how much it will cost. The website also has information on what you can do before you arrive in Canada, such as finding housing, registering with health care providers, and enrolling in schools or colleges.

Best places to live in Canada and how it compares to your existing home

There are many factors to consider when deciding where to live. You need to know the climate, the cost of living, the culture, and what type of lifestyle you want. It’s a big decision that can be overwhelming at times. Canada is a beautiful country with lots of different climates and cultures. We list the best places in Canada to live and how they compare to your current home:

Montreal: A vibrant city with a great arts scene and French culture
Vancouver: A coastal city with mild weather
Toronto: A multicultural city with an expensive cost of living
Ottawa: The capital city with lots of green spaces
Calgary: A fast-growing city in the west that offers affordable housing

What type of jobs can you expect to find in Canada?

Canada is a country of immigrants with a lot of opportunities for newcomers. There are many jobs available in Canada for skilled workers. The job market is wide open because of the need for skilled workers across the country. Jobs available include administrative assistant, graphic design, hospitality, IT technician, and medical administrative positions. Other jobs in the sectors of the Canadian economy include manufacturing, mining, fishing, forestry, and oil production. It is a country with an open-door policy for welcoming immigrants. It has some of the best opportunities for newcomers and expats. The Canadian economy is highly diversified regarding the need for different skills. And plenty of opportunities are available for newcomers to find work. Canada has a wide range of industries, occupations, and job titles to choose from, which means you can find the right job that suits your skill set and interests.

Is income tax higher than in the United States?

Generally speaking, Canada’s general tax rates, including income tax, are higher than they are in the United States.

Some argue that you get more for your tax dollar but there are many people on each side of that argument.

US citizens typically get a rough time because they have to file Canadian tax returns with the CRA and also US tax returns with the IRS.

US citizens and Green Card holders have to file US tax returns no matter where they live or work.

There is a modern tax treaty between the United States and Canada which prevents US citizens paying double tax. It does protect most Americans most of the time, but it’s not perfect.

As a US citizen, or a Canadian with dual US nationality, it’s important to keep abreast of US tax laws because and get good advice before planning too far ahead.

September 21 2022

Filing U.S. back taxes in Australia

If you’re a U.S. citizen or Green Card holder residing in Australia, tax-time can be less straightforward than filing a simple tax return. Many expats aren’t even aware that they are required to continue to file their U.S. tax returns once they have settled in a new country. It can be a little confusing, and oftentimes, stressful. The rules and seasons are quite different, and it’s not always the simplest thing to figure out for yourself.

With the United States being one of the few countries that requires their citizens to declare foreign income and file a tax return even while residing overseas – it’s usually the safest option to assume you must file in both the U.S. and Australia.

You will need all of your tax related documents from the country you are residing in, such as income statements, dividends or interest earnings, and receipts from certain expenses to file your U.S. taxes. And there are also a few differences to note about filing/lodging in the different countries.

The Australian tax season operates from July – June, with lodgement of taxes being due by the end of October, while the U.S. follows the calendar year. But being an expat currently residing overseas, you are automatically awarded a two-month extension, with the option to apply for another extension into October.

Important things to know about Australian taxes as an expat:

The requirement to lodge taxes in Australia will depend on your residency and domicile status. (Domicile being your permanent home, and residency being where you spend the majority of your time.)
You are an Australian resident for tax purposes if you’ve resided there for more than half a year without a permanent residence somewhere else.
Australian residents pay tax on all and any income over $18,200.
Non-residents pay tax on all income that has been earned from an Australian source (some exceptions apply).
Non-residents are also taxed at a higher rate, but are only required to report on income earned within Australia – not worldwide.
Holding an Australian superannuation fund can provide certain tax benefits.
You may also be required to pay the Medicare levy surcharge, which will be applied to your tax return.

I want to know more about US taxes abroad

Things to know about U.S. taxes as an expat:

If you are required to pay income tax in Australia, there are certain IRS programs that help you avoid double taxation, and prevent you from having to pay tax on the same income in the U.S. as well. Two of them being the ‘Foreign Earned Income Exclusion’ which allows you to exclude a certain amount of your income from U.S. taxation, and the ‘Foreign Tax Credit’, which applies U.S. tax credits to offset the tax you’ve already paid in Australia.
The ‘Foreign Tax Credit’ program allows you to carry excess credits forward to use on future tax returns.
You still have to file even if you don’t owe any tax in the U.S.
If you own foreign assets worth over US$200,000 (excluding your home), you must declare them.
If you had combined bank balances totaling over US$10,000 across your non-US bank accounts (including superannuation) at any time during the tax year, you are also required to file a Foreign Bank Account Report (FBAR).
The U.S. – Australia Tax Treaty enables the two countries to share tax information. The two government tax agencies freely communicate, and you should be aware that both countries will be aware of your tax obligations and/or debts.
Australian pension/superannuation contributions are NOT tax free regarding your U.S. taxes.
You must calculate your earnings from January – December.
You must report your income in U.S. dollars, and you must convert your AUD earnings as accurately as possible into USD, using the rates set by the IRS.
If you have earned over US$12,550, or over $400 of income from self-employment, you will be required to file form 1040.

While many U.S. citizens do not end up owing any American taxes, due to the offsets applied from the foreign tax paid, filing is still a requirement and there are two types of penalties that you may face if you fail to file your taxes: failure-to-file penalties, and failure-to-pay penalties.

There is also the more serious case of the passport revocation law, which came into effect in 2015, which allows the U.S. government to revoke the passport of any citizen who owes more than $50,000 to the IRS. While this kind of tax debt seems large, it is easy enough to build up, especially taking into account applied interest and penalties.

Fortunately, in 2014 the IRS revamped an amnesty program for expats which is called “Streamlined Foreign Offshore Program.” This program allows citizens currently residing outside the U.S. an opportunity to become fully US tax compliant, without facing any penalties.

To utilize this amnesty program, you must first show that any undeclared financial assets were due to non-wilful conduct, or of a well-intentioned misunderstanding. You will also be required to file the last three years of your federal tax returns, and six years of FBARs. If you can prove that your past failure to lodge was non-wilful, and you are willing to pay any outstanding due tax, then there will be no penalties applied.

To be eligible for the ‘Streamlined Foreign Offshore Program’, you must meet the following criteria:

Have spent at least 330 days outside of the United States in one of the past three tax years.
Be currently non-compliant, and have failed to file/lodge past tax return/s.
Your failure to comply was due to non-wilful conduct.

While tax time can be confusing and stressful (especially for expats), there are certified professionals out there that can help you get through it with ease. And while the threat of penalties can be scary, there are programs in place that can help you as a citizen to catch up and make things right in the eyes of the IRS.

We hope that this information has helped you, and that you have a clearer understanding of your tax obligations as a US citizen (or Green Card holder) residing in Australia.

September 8 2022

What is the T5 Statement of Investment Income in Canada, and How Does it Work?

The T5 statement of income is a tax form used to calculate your investment income and the amount of taxes you owe. Residents of Quebec receive Relevé 3 with the amount included in the provincial TP1 form and the T5 slip. The T5 tax form is provided to you by the financial institution where you hold your investment accounts. CRA does not require T5 for amounts less than $50.

The T5 statement is similar to your employer’s T4 statement of income in Canada. Like T4, the T5 slip can be transmitted to the CRA through EFILE, NETFILE, or offline via mail. For those who prepare many slips, the CRA is open to accepting specific slips outside of the T5 format. However, there are customized form requirements to be met.

The Government of Canada introduced the T5 Statement of Investment Income for individuals with a pension or other investment incomes not necessarily earned through employment. It helps retirees, people with RRSPs, those with spousal RRSPs, and those with self-employment income to file their taxes easily.

Items included in your T5 slip

The T5 slip has several information boxes on it. Each box has a specific purpose, as we discuss below:

Box 10: Actual amount of dividends received from Canadian corporations, other than eligible dividends

Box 11: Amount of dividends that are taxable, other than eligible dividends

Box 12: Dividend tax credits applied by CRA to your total owed tax amount

Box 13: Interest earned from all Canadian sources

Box 14: Other income earned from Canadian sources

Box 15: Only include your foreign income

Box 16: Only include taxes you paid on foreign income

Box 17: Royalties received from Canadian sources – from work or invention, etc.

Box 18: Capital gains dividends

Box 19: Accrued income, like equity linked notes interest, annuities, income earned due to death of a spouse or legal partner

Boxes 24 to 26 include dividends from Canadian sources that were not included in Boxes 10, 11, and 13.

Box 24: Actual amount of dividend earned

Box 25: Taxable amount of received eligible dividend

Box 26: Dividend tax credits you could claim on line 40425

Box 30: Equity-linked notes interest – interest earned through the transfer of linked notes

Who should file a claim for T5 income?

Financial institutions that hold your investment accounts will issue T5 slips for you. Even as you hold the account jointly with your common-law partner or spouse, you still get T5 slips. You would have agreed to a proportionate investment, hence you receive an equated percentage of the income.

Typically, the T5 slips contain details of your investments in shares, interest earned in your savings accounts, annuities, bonds, royalties, etc.

I want to know more about US taxes abroad

How to access your copy of T5?

There are two ways of getting your T5 slips from your financial institution. If you have an online account, follow the steps below:

Go to your financial institution’s website
Log in to your account with a username (or card number) and password
Under the ‘My Accounts’ section, select the option that says ‘View e-Documents’
Once you locate your T5, download the file
View, print, or save your T5 slip as required

What if you have T5 slips from multiple sources?

As a savvy investor, you may choose to diversify your investment horizons. This will lead to receiving T5 slips from multiple financial institutions. Also, each institution is expected to provide T5 slips for all your eligible accounts. Such a situation calls for reporting income from multiple sources in the T1 general.

Can you get your T5 online?

T5 is a digital form easily available online, even if your financial institution’s mail does not reach you. You need to log on to your CRA MyAccount to check your T5 slips. All financial institutions report T5 slips to CRA for incomes more than $50. You might want to sign up for your CRA My Account if you don’t have one already. Or perhaps your tax accountant can check it for you.

Timeline for filing your T5 statement of investment income

As per the laid out norms by CRA, all financial institutions should send out T5 slips to taxpayers. You should expect to receive your T5 slip on or before the last day of February. You should submit the T5 statement of investment income as part of your tax return for the previous calendar year by the end of April. CRA may penalize those who do not include T5 slips in their income for the second time in four years. Penal interest is also levied on the balance due. Also, if you receive your T5 slips late or see amendments in the same, you are required to file it as a T1-ADJ (adjustment request) at the earliest. Such reporting of income discrepancies keeps you safe from penalties, which may be up to $7,500.

Filing for a large number of T5 slips

In case you have more than 50 T5 information slips for a particular calendar year, you have to file them over the internet file transfer or Web Forms. CRA has a penalty of $250 if you fail to file returns slips between 51 and 250. The penalty goes up to $2,500 for a higher number of slips.

Benefits of using a professional T5 reporting service

A professional T5 reporting service like Expat Tax Online can prepare your taxes and save time. They provide a personalized approach for clients to manage their finances and get a clearer picture of their tax situation. A professional service can also help you prepare for the future by generating personalized financial projections. Other benefits include:

– Helps you better understand your tax situation and plan for the future

– It saves you time by outsourcing the process to qualified professionals

– Possibility of getting customized financial advice based on your preferences

– Smart and easy-to-understand approach to filing your taxes in Canada