Foreign tax credits for self-employment income

[Varus50]

Hi There,

I am a Canadian working abroad (in Australia) and really need help with foreign tax credits on self-employment income. I am 3 years into a temporary 4-year visa in Australia and will return to Canada after that. I do not want to wind up any RRSPs, TFSAs, in Canada. My visa does not give me residency in Australia, and I am only required to pay taxes on my professional income earned there (no taxes to pay on foreign capital gains or income). I believe I should still be paying capital gains taxes to Canada. For this reason, I feel I should be paying federal taxes, and a federal surtax to Canada in lieu of Provincial (BC) tax.

My problem seems to be that as self-employed (treated as business income), I cannot get a Provincial tax credit (form T2036) and CRA keeps re-assessing my return, trying to force me to pay BC tax over and above the taxes I am paying in Australia (which has higher marginal rates then combined federal and provincial tax here so I should only owe CPP and capital gains to Canada). Following CRA's first re-assessment, I have tried re-filing my 2007 return as a deemed non-resident, whereby Provincial tax was not calculated on my return and a federal surtax is calculated instead (which my foreign tax credits easily cover), but CRA just re-assessed me again as a BC resident without even contacting me, saying I owe thousands in BC taxes and penalties. I try calling them and they say they cannot help me over the phone and I just have to wait for re-assessment (which takes them about 9 months to do each time).

SO I guess I am looking for a rough framework to ensure I am doing this right:

1. Am I correct to treat myself as a deemed non-resident given my TEMPORARY status in Australia, not being required to pay taxes on foreign income/capital gains there, and my inevitable return to Canada?
2. Am I correct to file as Professional/business income, when i could possibly re-file as non-business employment income and then be eligible for the provincial tax credit (I would probably end up paying more tax this way due to not deducting professional expenses, and would I have to pay EI insurance?).
3. How can I get CRA to just live with me being a deemed non-resident, and charge me the federal surtax? i want them to do that instead of treating me as a BC resident and tagging me with Provincial tax that I cannot offset, as a self-employed, with foreign tax credits?

I know this is long but any help is appreciated and received with thanks. I am getting stressed because CRA keeps increasing the taxes and penalties I "owe" when in fact I believe I overpaid my 2007 and 2008 taxes and should be getting a refund! I am stuck in Australia and it is very difficult to get help here or even to contact the CRA given the time differences.