Written by: Ilana Kramarov, Director of Tax Australia for Select Investors
Is the great Australian lifestyle calling to you?
Before you answer that call, make sure your tax affairs are in order as with sun, fun and amazing food also comes high taxes!
The importance of planning early cannot be underestimated and to assist with your relocation plans, Ilana Kramarov, Director of Tax for Select Investors Australia, shares 9 top tax tips to consider.
- Timing of bonus payments
The derivation of income is generally tied to the date of receipt. When applying this to a bonus payment received after you step foot on Australian soil this can mean that you are taxed on the bonus even if you earned it whilst in Singapore.
To ensure you are not paying tax unnecessarily, either ensure all bonuses from your time working in Singapore are received before you board the plane or, if possible, ensure that the amount of the bonus can be determined and is reported by your employer as a non-contingent liability owing to you.
- Utilisation of Singaporean tax paid
Leaving Singapore can result in a Singaporean tax liability on employment income, bonuses and employee share scheme arrangements (even if not actually vested yet).
Where any of these amounts are received and taxed in Australia, the Singaporean tax paid on these amounts can be applied to offset some or all of the Australian tax payable. Be aware, however that you will need to keep clear records of the tax paid and what it is paid on, and you will need to make the application within 4 years. After 4 years, the offset for any foreign tax paid is lost.
- Classification of foreign retirement funds
Just because a structure is called a retirement fund it does not mean that Australia will view it as one.
Unless the terms and conditions of the fund is akin to that of an Australian superannuation fund, the foreign fund will be viewed, for Australian tax purposes as a foreign trust which leads to very different tax implications on withdrawals.
Always best to have a tax advisor check the classification before your arrival in Australia to ensure adequate time to plan for withdrawals before your relocation.
- Valuation of assets
All assets not acquired when previously resident in Australia (such as shares and real estate) are valued as at the date you become a tax resident, thereby forming the cost base for a capital gain/loss calculation on its future sale.
Depending on market movements this can either work in or out of your favour.
Where the asset is Australian real estate, a valuation is only required if you move into the property thus making the nomination that the property is no longer an investment property but instead your main residence.
- Asset ownership
The top personal tax rate in Australia is 47%.
Please contact us to discuss how the use of a life assurance bond, trusts, a superannuation fund and/or company can be utilised to meet your personal and family needs for asset protection, estate planning and tax efficiency.
- Foreign currency
Holding foreign currency may be a sensible investment decision, however the Australian tax implications need to be taken into account.
If you hold more than the equivalent of AUD 250,000 in foreign currency (either in an Australian bank or a foreign bank), the AUD exchange rate movement throughout the year will need to be considered and if you end up with more in AUD at 30 June than what you started with this is income to which Australian tax is payable (even if not physically transferred to AUD).
- When will you be considered a tax resident?
There can be a grey area around which date your Australian tax residency begins.
This can be caused if:
- your spouse and children relocate before you;
- you give up your lease in Singapore but travel before arriving in Australia; and/or
- you spend time in Australia before your final move.
The date you become resident impacts what income you are subject to Australian tax on so is very important to have clarified.
- Retaining a directorship in foreign private companies
Australia’s current corporate tax residency rules look at where the central management and control of a company is situated. Simply put, if that is in Australia, due to one or more persons making high level strategic decisions from Australia, that company can be considered an Australian tax resident.
Without the application of a double tax agreement to say otherwise this can mean that the foreign company is treated like an Australian incorporated company would be with its income subject to Australia’s corporate tax system.
Therefore, should you retain your directorship in a foreign incorporated company, the policies, and processes for how and when strategic decision making is carried out will need to be reviewed and/or implemented.
- Using foreign companies to hold passive investment assets
It can be common in Asia to use a company to hold foreign property and investments for asset protection purposes.
In considering whether to re-structure this kind of investment holding structure, attention should be put on the application of Australia’s controlled foreign company rules.
Under Australia’s controlled foreign company rules, the income and gains derived by the company can be attributed on an accruals basis to the Australian resident shareholder(s). This means that from an Australian tax perspective all income and gains are subject to Australian income tax even if the shareholder has not received a dividend from the company.
In summary, it is important to plan early for a tax efficient move to Australia, as there are many ways in which we can support with the planning process and individual circumstances are unique.
Ilana Kramarov works closely with Australian expatriates, through their Singapore journey and beyond. If you would like to discuss a tailored approach to tax planning for your move, please contact Ilana via email email@example.com.
This information has been prepared in good faith, is in the nature of general comment only, and neither purports, nor is intended, to be advice on any particular matter. You should not act or rely upon any matter or information contained in or implied without taking appropriate professional advice which relates specifically to your particular circumstances. Select Investors (Australia) Pty Ltd expressly disclaim all and any liability to any person (whether a reader or not) who acts or fails to act as a consequence of reliance upon the whole or any part of this information.