By Simon Peterson
Relocating to or from another country is complicated for a number of reasons. Simon Pederson has written previously about some of the points people need to consider in the following articles:
Migration: Financial Concerns When Coming Back to Australia
Migration: Superannuation For Those New To Australia
In this final article, we address some of the more complicated and technical aspects affecting expatriates. While we have done our best to simplify the below issues, with the aim of increasing your awareness, they really do require the assistance of a financial adviser. Therefore, we encourage you to seek personal advice prior to making any changes to your circumstances.
The Australian federal government meets each May to present their annual budget and without fail, they seemly make changes to three key elements: taxation, superannuation and social security. A constant theme of the recent budgets is that they are continually in the red, therefore, it is expected that they will "run the ruler" over areas where they can extract more taxation. There have been two major changes that specifically effect expats:
Division 293 Tax – additional contribution tax for high income earners
Division 293 tax was initially introduced in the 2012/13 budget to reduce the concessional nature of contributions to superannuation for high income earners. Typically, if you make a concessional contribution to superannuation it will be taxed at a maximum rate of 15 per cent, and this tax is paid from your contribution (ie with no out of pocket expense for you). However, for higher income earners the tax on contributions may be up to 30 per cent if their income is over $250,000 pa. We have found many of our expat clients living offshore remain "Australian income tax residents" and are being issued with Division 293 notices requesting payment of this additional tax.
Capital Gains Tax (CGT) discount
Following on from the above, in June 2013 the government’s budget announced changes to the eligibility conditions for the Capital Gains Tax (CGT) discount available to expats and foreign nationals residing in Australia. For Australian tax residents any asset held longer than 12 months is eligible for a 50 per cent discount on any capital gains. Pre-June 2013, this rule was also afforded to foreign income tax residents. This change has significantly limited the exemptions available to foreign income tax residents, and some conditions must be met.
For assets acquired after 8 May 2012, the discount is generally not available to foreign and temporary resident individuals (including beneficiaries of trusts and partners in a partnership). The discount is apportioned where a CGT event happens after 8 May 2012 and:
- you acquired the asset before that date, or
- you had a period of Australian residency after that date.
CGT events that occurred before 8 May 2012 are not affected.
To find out more about this and how it may impact you please visit the Australian Taxation Office (ATO): https://www.ato.gov.au/General/Capital-gains-tax/International-issues/CGT-discount-for-foreign-resident-individuals/
While we cannot provide personal advice on assets held overseas, Simon Pederson and the team at Bridges Sunshine Coast specialise in Australian Superannuation law. We also have partnerships with professional taxation accountants that specialise in Australian Tax law. If you have any questions about this article you can contact us at Bridges Sunshine coast or make an appointment with your local financial adviser.
Bridges Financial Services Pty Limited (Bridges). ABN 60 003 474 977. ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner.
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