Tristan Perry is the Head of Tax Australia, for Select Investors Australia, and is an Australian Tax Agent and Accountant based in Singapore.
“Our plan will create jobs. Our plan will continue to guarantee the essential services Australians rely on. Without increasing taxes.” Treasurer Hon. Josh Frydenberg, Budget speech to Parliament on 6th of October 2020.
The above statement in my view is basically the essence of the 2020 budget just handed down by the Federal Treasurer Hon. Josh Frydenberg with numbers of a deficit of $213.7 billion and net debt in 2020/2021 of $703.2b increasing to $966.2 billion by 2023/2024.
Personal tax cuts and business concessions, together with more hand-outs domestically without any nasty surprises made for a popular budget however this all comes at a cost of increasing out net debt to all-time record highs.
The Headline budget announcements include:-
- Changes to personal income tax rates by bringing forward the tax cuts planned for 1 July 2022, and back dating them to 1 July 2020 which immediately gives tax payers a benefit. This was by increasing the 19% personal income tax bracket from $37,000 to $45,000 together with increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000. What this means for a resident Australian tax payer on $80,000 per year is an additional $1080 in their pocket, and a tax payer on $150,000 is $2,430 in their pocket.
- Temporary Loss Carry Back Measures for businesses allowing them to carry back losses up to 30 June 2022 to 30 June 2019 or later.
- Temporary Instant Asset Write Off allowing businesses (with turnovers less than $5b) to deduct the full cost of business assets installed and ready for use by 30 June 2022, and second hand assets valued $150k or less to be deducted by 31 Dec 2020.
- Fringe Benefit Tax concessions for car parking
- Retain the existing corporate tax rates of 26% currently, and 25% from 1 July 2021 for qualifying entities
- Job Maker – this is a hiring credit scheme which provides up to $200 to companies on a monthly basis for young employees to offset against their PAYGW obligations.
- Job Keeper – no changes planned to the existing extension of Job keeper which is due to phase out to the end of March 2021. The Job Keeper extension is costing an additional 15 billion in the budget.
- And further Superannuation reform ensuring that poor performing funds have to report back to their members together with ensuring superannuation accounts are more portable to ensure that multiple accounts are not unnecessarily opened.
Turning my focus now to expatriates, generally changes in the budget for expatriates are usually unfavourable and result in additional taxes for us all so the good news is, there wasn’t really any!
A few noticeable changes which may however affect expatriates are below:-
Corporate Tax Residency – The Government will amend the law to provide that a company that is incorporated offshore will be treated as an Australian Tax Resident if it has “significant economic connections” to Australia. This test will be satisfied where both the company’s core commercial activities are undertaken in Australia and its central management and control is in Australia. Current residency test is – a company that is not incorporated in Australia will be a resident for Australian income tax purposes only if it carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia. Noting that if a company is incorporated in Australia, regardless of where the directors and shareholders live, the company itself will b a resident of Australia for tax purposes.
Virtual meetings – The government will conduct public consultation into making changes to the Corporations Act, which will allow companies to call and conduct meetings electronically, as well as achieving quorum through virtual attendance, and provide certainty that company officers can electronically execute documents.
Updating the list of “exchange of information” jurisdictions to include Hong Kong, and Kuwait amongst others, meaning that residents of these countries which receive certain distributions from Managed Investment Trusts based out of Australia will only be subject to 15% withholding tax (instead of ordinary non-resident rates of 32.5%+).
Also the Australian migration numbers quota remains unchanged at 160,000 places which includes the Global Talent Program, which has increased by 15,000 places and the Business, Investor and Entrepreneur (BIPP) will be doubled at 13,500 places.
All in all on reflection, it was the budget we all expected we would have however the question remains, how are we going to dig ourselves out of debt in the future!
**Please feel free to reach out to Tristan for an obligation free consultation on Australian Tax Planning for expatriates on 91086398 or tristan.perry@selectinvestorsaustralia.sg
The levels and bases of taxation, and relief from taxation, can change at any time. The value of any tax relief depends on individual circumstances.