When To Move - Tax Threshold Solver
If you find yourself in the exciting, daunting situation of moving countries, your mind might eventually turn to such considerations as taxation. If you are going between two countries that have tax-free thresholds you are then in a fortunate position where you can optimise your taxation by utilising the tax free threshold from both countries. With correct planning and your life conveniently aligning with tax decisions you can most effectively minimise your tax obligations.
This article is based on the assumption you are going from one country to the other, taxation is based on where you reside, tax free thresholds accrue regardless of time spent residing in a country and thresholds are uniform. Tax minimisation is legal, tax avoidance is not.
Split The Difference
In essence, if you were to to move between two countries that both had tax years ending at the same time ideally you would move halfway through the year, splitting your income between the two, capturing as much income in each jurisdiction with the tax-free threshold.
If two countries have tax-years that differ, e.g. UK ending in early April and Australia on the 30th June, then you want to find the halfway point adjusting for the overlap in tax years.
For instance, if you are living in London and moving back to sunny Australia, the ideal time to move is in November. If someone was earning £60K, by moving mid-November, they’d be earning £30K in the UK for the given tax year and £30K in Australia for the respective tax year.
* This for simplicity assumes you can earn per-day. In reality you are probably paid monthly. I’ve kept the currency constant so you can see the logic play out.
Split The Difference + Add In Time for A Holiday / Time to find a job
You might have a gap in earnings based on holidays or time to hunt for a new job. The logic is the same; find the midpoint, you just need to adjust for the time you expect not to be working.
The Excel calculator you can download from the link below. You can change the dates to suit your particular circumstance. Please reach out if not clear.
Download: Excel - When To Move Calculator