As 30th of June slowly approaches, it is well worth the time and energy to turn your attention to the end of Australian Financial Year Tax Planning to ensure you leave no opportunities on the table. In conjunction with the below overview, AustCham and Select Investors are presenting a comprehensive webinar on Wednesday June 2nd at 16:30 SGT outlining the key considerations for the end of year tax planning.
- Defer Australian Sourced Income and Accelerate Deductions
This is always the fundamental principal of tax planning as you approach 30th of June each year, even as an expatriate. As an Australian non-resident for tax purposes, you are only taxed on your Australian sourced income and assets, which is, for most of us, Australian property, and any shares which we acquired in Australia and were not “deemed” sold when we moved. So, applying this principal to your property, generally you cannot defer rent, but any expenses which you may have to pay, ensure to pay them pre 30th of June including for repairs and maintenance work, and other expenses like land tax and depreciation reports. Furthermore, Australian based Income Protection Insurance premiums are also deductible against your Australian rental property. For those of us who have any Australian based business, the above deferral of income, and acceleration of expenses applies, as most businesses in Australia are taxed on a cash basis (meaning only on receipt of revenue, and payment of expenses).
In the event that you have a positively geared rental property back in Australia, then you are likely paying non-resident tax at 32.5%+ with no tax-free threshold on your net income, which is unpleasant. Accordingly, if you are under 67 (or 75 and working), you can consider making a deductible superannuation contribution of up to A$25,000 before 30th of June which can be claimed as a deduction against your rental income in the same year, thus saving you 32.5% tax at the individual level. This does however get taxed at 15% within your superannuation fund on the way in, and 15% annually on its earnings up to retirement, however there is a net saving of 17.5% together with the fact that you are putting some funds towards your retirement. Remember to ensure this is contributed well before 30th of June to ensure the fund receives it in time, and once the funds go in, they are effectively locked in there until you are 60 and retired, or 65 years of age. Furthermore, from 1 July 2018, you can carry forward any unused “concessional” contributions to the 2021 financial year meaning that you could contribute up to $75,000 this year (to 30 June 2021) if you did not make any contributions in the last two years. Superannuation can be complicated and therefore it is important to reach out to a professional like myself to discuss your contributions before you make them.
- Depreciation Reports
If you have a rental property back home and do not have a depreciation report, it is worth considering this if the property was constructed after 15 September 1987 or had substantial renovations after this time. Depreciation is a deduction for the reduction in value of the construction (not the land!) of the property together with the plant and equipment, and furniture and fittings. There was a recent rule change which meant investors may not claim deductions for second-hand plant and equipment already installed within a newly acquired property however the capital works deduction on the value of the construction cost may still be claimed and lasts for 40 years! I recommend reaching out to a quantity surveyor such as BMT or Tax Shield to discuss your specific property and determine whether it is worthwhile commissioning a report. Furthermore, the cost of the actual report is deductible so if you pay for this pre 30 June, you may claim a deduction. You can also amend some of your old returns to do a back claim after the report is produced which could potentially pay for the cost of the report in refunds.
- Share Trading
For those expatriates who may have been holding shares when they moved away from Australia and never elected a “deemed sale” for tax purposes in that particular year, these shares will still be taxable in Australia on sale. Accordingly, year end presents opportunity to sell (and buy back) any shares at a loss to crystalise the Australian capital loss (and potential gains against the loss as well). If you buy them back as a non-resident, you then pay no further tax on the gains as a Singapore tax resident until you move back to Australia again.
- Capital Gains Tax Changes
More a point to note however the Capital Gains Tax Principal Place of Residence Exemption is removed after 30 June 2020 for “Foreign Tax Residents”. This means that if you sell your former family home as a non-resident after this date, you will be taxed on it with no principal place of residence exemption allowed. The important action is to either hold onto it until you return back to Australia as a tax resident again OR sell it in the future but be aware that you will have no tax concessions allowable under this provision. Some exemptions do apply for divorcing couples and other major life events.
- Land Tax
For those expatriates who may have recently arrived in Singapore, it is important to ensure that your property back in Australia is no longer listed as your principal place of residence for land tax purposes, as you will be liable for land tax on this now going forward.
- Trust Distribution Minutes
For those few that may still have an Australian discretionary trust active, ensure that you prepare your trust distribution minutes by the 30th of June.
- Repatriation Planning
In the event that you are an expatriate and considering a move back to Australia within the next 24 months, its well worth commencing repatriation planning to ensure you understand the effect of bringing back your assets into a jurisdiction which taxes you on worldwide income and world wide assets. This would include a review of the tax position of each of your assets and income, together with restructuring opportunities, Australian tax residency position, treatment of those assets which will remain offshore and ensuring you have a retirement plan in place as your income in Australia will most likely drop and income tax will increase.
Please reach out if you would like an obligation free meeting to further discuss any questions you may have via email: Tristan.firstname.lastname@example.org and do register for the upcoming webinar to learn more about Australian tax planning.
The above information is general in nature and could vary depending on your personal circumstances. Do contact me if you have any questions about any of the above or for an obligation free discussion to talk more specifically about personal circumstances.