The move to Expatland is an exciting time. However, on the topic of tax we often find that Australians departing do not receive the right initial advice and therefore often make costly errors as result of complex outcomes they have not seen coming.
To help, we have developed our guide ‘Australians Moving Abroad’ which provides answers to the most commonly asked questions. The guide covers many tax issues such as Tax Residency, Capital Gains Tax, Australian property issues, Foreign Earnings, CGT Main Residence Exemption issues, and Non-resident Tax Rates.
If you need specific advice about your situation we would be delighted to assist you through CST’s Departing Australia Tax Review service.
For clients with significant domestic and/or international investments our advisors will recommend our Strategic Tax Review service to provide you with more detailed advice.
What are the tax consequences of arriving in Australia and becoming tax resident?
From the date of arrival into Australia, you will generally be regarded as a tax resident of Australia and be required to declare income from worldwide sources from this day forth. Where you are classified as a temporary resident, only Australian sourced income will be taxable in Australia. In the first year, your tax-free threshold will also be pro-rated based on the number of months you will be a resident of Australia for tax. All of your assets will be deemed to have been acquired for their market value as at the date of your arrival for capital gains tax purposes. Your foreign income may also be subject to income tax depending on the movement of the exchange from the date of arrival to the date of actual conversion
What is the minimum time I can remain in Australia without being tax resident?
Australia has a 183-day rule with regards to determining whether you are a tax resident of Australia. However, there are also issues associated with one’s domicile which should also be considered.
Does Australia tax its residents on a world wide or territorial basis?
Australian tax residents are subject to income tax on their worldwide income. Territorial tax only applies if you are classified as a temporary resident of Australia for tax purposes.
Is foreign income taxable in Australia e.g. foreign rental income, foreign interest income and foreign dividend income?
As an Australian tax resident you will be taxable on foreign income derived during the year.
Does Australia tax income on a remittance basis?
No – Australia taxes foreign income as it accrues regardless of whether the income is remitted to Australia.
Does Australia have a sales tax or VAT tax on purchases?
Australia has a consumption tax called the Goods and Services Tax (GST). The current rate of GST is 10%.
Does Australia have a capital gains tax that taxes me when I sell foreign assets?
Yes – Capital gains tax applies in Australia on foreign assets for any capital growth arising from the date of commencement as an Australian tax resident to the date of disposal.
Does Australia have an estate tax or death tax?
No – Australian does not currently have an estate or death tax.
What is the top tax rate in Australia?
The top marginal tax rate for individuals in Australia is 45% with an additional 2% Medicare Levy and 2% Temporary Budget Repair Levy. This top rate applies on taxable incomes greater than $180,000.
Does the tax rate vary for different types of income and if so what are the rates?
The income tax rate applies to all forms of income , however there may be rebates which apply which will reduce the tax payable.
What are the common tax deductions available in Australia?
You may claim a deduction for any payments made in relation to the generation of income. Common deductions associated to employment income include out-of-pocket expenses such as:
- Motor vehicles
- Communications – cell phone, internet
Does Australia require joint tax returns to be filed for me and my spouse or are separate tax returns required?
In Australia each taxpayer must file a personal return. However the joint incomes will be considered in determining eligibility to certain rebates.
If I have a foreign company or foreign trust before I arrived in Australia is the income of that company or trust taxable?
In Australia, the Controlled Foreign Company (CFC) and Transferor Trust rules will apply to attribute income to you personally if you are considered to control the assets of a foreign company or trust.
Do children under 18 pay a higher rate of tax on certain types of income?
Yes – Children who are not working or regarded as an Excepted person are taxed at a higher rate than adult individuals. There are also certain forms of income receipts (such as a distribution from a deceased estate) which are not subject to the higher rates of tax in the hands of a child.
Is there a gift tax in Australia?
No there is no gift tax in Australia, however when assets are gifted capital gains tax may be relevant.
What are the personal tax exemptions in Australia e.g. a gift from an overseas relative or a foreign insurance payout?
Gifts and insurance payouts from overseas relations are generally not taxable in Australia.
If I receive shares as part of my salary is this taxed in Australia?
Shares are regarded as payments in lieu of salary and wages and taxed at your marginal rate of tax in either the year they are granted or the year in which they vest (depending on the terms and conditions associated with the employee share scheme).
When I leave the country is a ‘termination payment’ taxed by Australia before I leave?
Australian sourced income will be subject to Australian withholding taxes. This is the cases regardless of whether payment of the termination amount is done before or after you leave the country.
What are other tax consequences of leaving the country?
As a resident of Australia, you will be deemed to have disposed of your non-real property assets for their market values on the date of disposal. This will give rise to a deemed capital gains tax event and an associated tax liability. However, you may choose to defer this taxation event to the point when you dispose of the asset in the future.
If you do not declare a capital gain on the assets in the year that you cease being a resident of Australia, it will be assumed by the Australian authorities that you have elected to defer the taxation point.
Are there any tax consequences of me transferring money from Australia to my say home country?
There are no tax consequences arising from the transfer of money back to your home country unless the source of funds is Australian income in which case there will generally be a tax liability.