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Exfin Blog on Current Issues impacting Australian Expats

NSW State 2023-2024 Budget - Little of Impact to Expats - September 19, 2023

The NSW State Budget, brought down earlier this week, contained little of interest or impact to expats. It did offer an expanded first home buyers assistance scheme - with a stamp duty exemption for homes valued under $800,000 and a concessional rate for purchases between $800,000 and $1 million. This package targets 84 percent of first home buyers and is estimated to cost $691 million. However, the residence requirements typically disqualify expats unless they are permanently returning from overseas.

In an unrelated announcement, the Victorian government has indicated that it begin charging a 7.5% levy on revenue collected by short-stay accommodation providers such as Airbnb and Stayz from January 1, 2025, as part of a raft of housing measures.

Australian Residential Property Prices continue to Increase - September 1, 2023

CoreLogic’s national Home Value Index rose again in August, marking the sixth consecutive month of a housing value recovery - see the Chart below. The rate of growth accelerated over the month, interrupting a two-month trend of slowing capital gains.

Every capital city except Hobart (-0.1%) saw a rise in prices over the month - led by a 1.5% increase in Brisbane, followed by Sydney and Adelaide with a 1.1% gain. Gains appear to be largely a consequence of low supply - note CoreLogic's comment (our emphasis) that, "... Hobart home values unchanged since stabilising in April, while values across the ACT have risen only mildly, up 1.0% since a trough in April. These are also the only two capital cities where advertised supply is tracking higher than a year ago, suggesting a rebalancing between buyers and sellers is a key factor contributing to the stability of values in these regions.”

Voting in the Voice Referendum - August 30, 2023

The Voice Referendum will be held on Saturday, October 14. Australian expatriates looking to vote should refer to the AEC page on Overseas Voting for further information.

New Tax Residency Rules - Consultation Paper - August 23, 2023

The Australian Treasury has now released a Consultation paper on proposed New Tax Residency rules with feedback required by September 22, 2023. Our initial reactions to the Consultation paper are as follows.

In general, we continue to believe that while there were obvious issues attaching to the determination of tax residency in Australia, they did not require wholesale change, and our concern is that the proposed changes were driven more by desire to cast the revenue net wider than they were about simplicity, clarity and reform. Although the original Board of Taxation (BoT) working group indicated that they had canvassed widely with a variety of stakeholders, the working group was dominated by tax professionals from the large accounting firms and representatives of Treasury and the ATO. This group is inherently likely to be more sensitive to the views of the ATO and large business groups than to individual expatriates.

It is also hard to accept protestations that the rules will be "revenue neutral", when statements have been made that the intention is to make "tax residency more adhesive".

However, a short number of specific comments:

  1. The Consultation paper, consistent with the original BoT proposal, includes an "overseas employment rule", indicating that an employment offer for a period "of more than two years" would be adequate to break tax residency once other requirements aresatisfied. In practice, a rule based on an employment contract of "two or more years" would be (much) preferable. Importantly, however, we also presume - although there is no direct statement to this effect - that this means we would no longer have a situation where it is impossible to break tax residency if a spouse remains behind in Australia. This is a piece of Victoriana that should have been changed long ago and indirectly it may provide some further options in terms of addressing the discriminatory approach to the taxation of expatriate main residences.

  2. The continued maintenance of the maximum 45 day period and expats can be resident in Australia before being considered tax resident is a disappointing response. It will be difficult to manage in cases where expats have regional responsibilities, school-aged children or elderly parents based in Australia, and in practice will mean that family holidays and visits will perhaps need to take place overseas rather than in Australia.

  3. There is still no mention is made of transitional provisions. As we have stated elsewhere, individual expatriates should be able to rely upon professional advice provided in relation to residency under the current rules and be effectively grandfathered. It would be naïve in the extreme to assume that the new rules will not require judicial interpretation - we are jettisoning years of legal precedent - no matter how well drafted. Consequently, we would expect a heightened level of uncertainty around tax residency for several years as a consequence.

Australian Real Estate - it may pay to wait - August 12, 2023

The spring selling season in Australia has started with a sharp rise in real estate listings, but only in a few locations, including Sydney, Melbourne and Hobart. Within those locations, there is a clear indication that many of the sellers are prior investors, looking to sell out of properties on the back of significant increases in mortgage costs.

In other locations, such as Perth, Adelaide and Brisbane, listings are considerably below historical norms, and these continue to be sellers markets simply on the basis of constrained supply. In these locations, and generally, standing back from the market and simply ensuring that you have finance arranged in case opportunities present, when and if supply increases as we proceed through spring, may represents the best approach in the short to medium term.

New Tax Residency Rules – Consultation Initiated – August 1, 2023

As we mention elsewhere in the website, it became apparent during the first six months of this year that the new tax residency rules which had been promulgated could not be implemented, at earliest, before July 1, 2024.

Consistent with that being a potential implementation date, the Australian Treasury released a Consultation paper on new Tax Residency rules in late July 2023, asking for feedback on the Board of Taxation's proposed changes by September 22.

A first review of the Consultation paper suggests that there have been no fundamental changes made to the Board of Taxation's initial recommendations - including the contentious 45 day threshold, summarised as follows:

"Under the Board’s proposed model, the secondary tests would require an individual to be physically present in Australia for a minimum of 45 days in an income year before commencing residency, or a maximum of 45 days in an income year before ceasing residency."

The Consultation paper tries to address concerns around the 45 day threshold, indicating; "Under the Board’s model, an individual would not become a tax resident merely by being physically present in Australia for 45 days. The individual would also have to meet at least two of the four factors outlined in The Factor Test below."

The four factors proposed by the Board are: the right to reside permanently in Australia, close family ties in Australia, access to Australian accommodation, and Australian economic interests.

We will shortly address the consultation paper in more detail within the pages of the website dedicated to the new tax residency rules.

Australian Super Funds - Full Year Performance - July 18, 2023

For expats wondering how their super funds are performing, the chart below illustrate the Top 10 best performing balanced Super Funds over the financial year ending June 30, 2023, according to SuperRatings.

As you can see, some funds have returned exceptional results over the 12 month period to June 30, 2023 - with the top performing fund delivering growth of 13.3%. The full set of data is not currently available so we don't know about performance across the board just yet. It seems however that some of the larger funds, such as AustralianSuper, may be suffering from poor results in their commercial property portfolios. There is also discussion raging around the reporting of results for unlisted assets and perhaps the notion of whether their performance adequately compensates for the relative lack of transparency in terms of valuations.

Australian House Prices – Looking for Direction? – June 16, 2023

You would have thought that if anyone had the data, experience and highly paid help to assess where Australian house prices were headed in the coming months, it would be the big four Australian banks. However, there is an astonishing degree of variability in their predictions across the major capital city markets for the rest of 2023, much less 2024.

Compare the tables below - even for the remainder 2023 we have the banks predicting a movement in Melbourne prices of between +2% and -6%, and in 2024 a range of between +8% and -1% for Adelaide. The lack of agreement amongst the banks, who presumably work on models that are basically the same, suggests a very significant divergence in terms of the extent and impact of interest rate rises, and variables such as the amount of stock. Our view is that participation in this market, on the buy side, involves quite considerable risks and waiting at least 3 to 6 months for any recessionary impact is desirable.

Australian Property Prices - "into the looking glass" - June 5, 2023

Australian home values have increased over the last two months, against the background of sharp interest rate increases and tightening credit, driven largely by shortages of stock and increased immigration. Whether the momentum can be sustained is debatable, with the possibility that it will spur further interest rate increases by the Reserve Bank at its next meeting, on Tuesday, June 6.

Nevertheless, what is interesting is that while almost all real estate markets in Australia peaked during Covid, most are still well short of a return to those peak values, see the table below. However, some of the more affordable markets, such as Adelaide, Perth and Darwin, have in large part not yet surrendered the peak values achieved during Covid. For example, Adelaide saw prices peak 44.7% - the largest amount across all major capital cities - but so far the market is only down 2.4% against peak values, compared to Sydney at 13.8%.

Vicorian State Budget - Substantial Land Tax Increases - May 23, 2023

The Victorian State Treasurer has just unveiled a "COVID Debt Levy" which is intended to raise $8.6 billion over the next four years and will remain in place until 2033.

An important aspect of this levy includes a reduction in the threshold for Victoria's land tax - which doesn't apply to main residences - from $300,000 to $50,000. An annual charge of $500 will apply to affected properties valued between $50,000 and $100,000 as part of the 10-year levy, and a charge of $975 for property landholdings worth between $100,000 and $300,000. In tandem, land tax rates for properties above $300,000 will rise by $975 plus 0.1 per cent of the land's value, and the absentee owner surcharge rate will increase from 2 per cent to 4 per cent.

Additionally, the government announced it will remove the payroll tax exemption for the top 15 per cent of non-government schools by fee level. Budget papers suggest about 110 schools will be affected, involving $134.8M, when it comes into effect in 2024/25. School fees will inevitably be under pressure.

American Express withdrawing from Australian FX services - May 22, 2023

We understand that Amex is currently “decommissioning” its foreign exchange and International Payments offering in Australia and Singapore - in fact Amex will no longer provide foreign exchange services for the majority of its customers outside of the United States by the end of 2023.

Amex has indicated that it will individually contact customers to discuss the local implication of the changes and provide support in terms of transitioning to alternative providers. Fortunately, the market is very competitive and well serviced, so we don't anticipate significant problems for individuals and businesses, except in terms of transitioning to new processes and systems. Alternatives include OFX, an Australian business quoted on the ASX, with whom we have had a very long-standing relationship and whom we do not hesitate to recommend.

Federal Budget a non-event for Expats - May 11, 2023

The Australian government's recent Budget announcements featured no changes of significant relevance to expatriates. This included no mention at all of any pending changes in relation to how tax residency may be determined - confirming our view that the earliest that these changes could come into effect would be July 1, 2024.

Expats should note however that the budget contained confirmation that the government will proceed with its previously announced measure to reduce the tax concessions available to individuals with a total superannuation balance exceeding $3 million, from 1 July 2025. There is no indication that the $3 million cap will be indexed, and consequently this may have implications for expats looking to retire back into Australia in the longer term in terms of their investment profile.

Kiwis in Australia - A new fast track to citizenship – April 21, 2023

The Australian government has just announced that with effect from July 1, 2023, New Zealanders resident in Australia - current special category visa holders - will have easier access to Australian citizenship provided they meet a four year residency threshold and other normal eligibility requirements. They will not be required to first become permanent residents.

The government also flagged aligning voting entitlements between the two countries – Australians living in New Zealand already have restricted voting rights after one year of residency, but only New Zealanders with dual citizenship can vote in Australian elections.

Singapore Announces Closure of CPF Accounts for Non-Citizens/Permanent Residents - April 12, 2023

The Singapore government has announced that it will require members of the Central Provident Fund (CPF) who are neither citizens or permanent residents to close their accounts by March 31, 2024.

Note that the CPF is not regarded as a foreign superannuation fund (FSF) for Australian tax purposes, and therefore the entire amount of the fund exceeding employer and employee contributions may be subject to tax at Australian marginal rates on withdrawal. For individuals tax resident in Australia the required withdrawal may therefore give rise to tax implications, and it may be appropriate to seek tax advice in terms of the extent of any tax exposure and whether this can be reduced by timing withdrawals over the next year and making concessional superannuation contributions.

Note from a practical perspective that Singapore government intends to notify impacted individuals individually, based on the contact details held by the CPF - we expect these will often be out of date. Therefore, it may be years before certain individuals become aware of the fact that their CPF balances are not earning any investment income - so, we would encourage expats to communicate these changes to any friends or colleagues that may be affected.

Australian Visas - "Some Improvement, but work still to be done" - March 25, 2023

The Australian Department of Home Affairs is trumpeting an improvement in visa processing times, but the improvements have largely been in the issuance of temporary visas - see the table below. In terms of the admittedly more complex permanent visa applications, skilled permit applicants are still facing processing times of up to 6 months, while some partner visas extend out to 8 months.

Nevertheless, it appears that some progress has been made, and hopefully this will also apply to the processing of Australian passports, which have the dubious distinction of being the most expensive in the world.

A reminder to Foreign owners of Australian property: Vacancy Fee and Register of Foreign Ownership - March 8, 2023

As we mention elsewhere on the site, a vacancy fee is payable by certain foreign owners (not Australian citizens or permanent residents) of Australian residential property if their property is not "residentially occupied or genuinely available on the rental market" for at least 183 days in a 12 month period. The vacancy fee applies to foreign persons who made a foreign investment application to purchase residential property on or after on May 9, 2017 and requires them to lodge an annual vacancy fee return.

For the purpose of the vacancy fee, a residential property is considered, "residentially occupied, or genuinely available on the rental market", if:

  • the property owner, or a relative of the owner, genuinely occupied the property as a place of residence; or
  • the property was genuinely occupied as a place of residence subject to a lease or licence with a term of at least 30 days; or
  • the property was made genuinely available as a place of residence on the rental market, with a contract term of at least 30 days.

Note that properties made available for short-term leases of less than 30 days (including via web-based vacation rental sites such as Airbnb) do not meet the above criteria.

There are a number of situations where a foreign person may be exempt from being liable for a vacancy fee, including where legal ownership of the property has changed during the year, the property has been undergoing substantial repairs or renovation or the property is part of an estate being administered. Additionally, should a property cease to be owned by a foreign person during the course of a vacancy the vacancy fee obligation will cease to apply.

As regards the amount of the fee, it will generally be equivalent to the residential land application fee that was paid by the foreign person at the time the application for FIRB approval to purchase the property was made. The current minimum (July 2022) fee is $13,200 for applications involving the purchase of property valued at $1million or less.

We believe there may be a significant under-reporting in this area and that there may be a large number of non-compliant foreign owners who risk substantial penalties. The expectation is that the accommodation/housing crisis will drive authorities to more effectively identify unoccupied properties in the short to medium term and upgrade compliance activities - experience overseas have shown that is relatively easy to identify unoccupied properties.

Compliance activities should also be improved as a result of the (long overdue) introduction of a new Register of Foreign Ownership of Australian assets, to be administered by the ATO, on July 1, 2023.

Super: Changing taxation of Large Funds - February 28, 2023

The government wants to legislate an objective for superannuation, and the proposed wording is:

"To preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way"

Adopting this objective has a number of consequences, and the most consequential is probably an attempt to disallow early access to superannuation for house purchases, as proposed by a number of Liberal politicians. We find it hard to believe that they want to "fan the flames" of an already overpriced property market, but that's their position.

In any event, one subsidiary result of the focus on superannuation funds, has been an announcement today by the Treasurer that from 2025-2026 the concessional tax rate applying to future earnings on super funds with balances over $3 million would be 30% - which is double the current concessional rate of 15%. Fewer than 1% of all current superannuation accounts have more than $3 million in them so the impact will be narrow in terms of the number of individuals impacted. However, the Treasurer has indicated that it is not the government's intention to index the amount, so the impact will widen over time.

The two-year intervening period seems long, extending into the next parliament, but fund administrators have argued that many of these funds have illiquid investments that will take some time to manage appropriately.

Wondering about the impact of interest rate increases in Australia? - February 16, 2023

For expats wondering about the impact of successive interest rate rises on the "average Australian" a good barometer is the ANZ Roy Morgan consumer confidence survey. After the last meeting of the Reserve Bank, where it was indicated that there were a "plural" number of rate rises to come, the market locked in a peak rate of 4.1% - some 0.5% higher than the level predicted before the meeting.

If that occurs, it would constitute an increase of 4% in the base rate in 14 months, much faster and greater than anything that has been seen in Australia since the 1990s. It is certainly attracted the public's attention, and they don't believe the RBA is bluffing. Consumer confidence levels have now dropped below those seen during the Covid lockdown era - see the chart below:

It's hard not to see this translating to a recession during the next two years, even if RBA forecasts don't (yet) support that outcome. Certainly, the increases will cause extreme hardship in certain parts of the economy, impacting retail sales and continuing the slide in real estate prices.

Australian Super Fund Performance: "An Awful Year" - January 22, 2023

For expats wondering how their Australian super funds have performed recently, the answer in most cases will be, "horribly".The charts below illustrate the Top 10 best performing balanced Super Funds over the calendar year ending December 31, 2022 and over the last five years, according to SuperRatings.

As you can see, the fund returns over the 12 month period to December 31, 2022 were exceptionally poor - with the top performing fund delivering growth of just 1.7%. In comparison though, AustralianSuper's balanced fund, which ranks second in performance over the last 10 years, actually delivering a loss of 4.8% - which was about the median for all balanced funds. The main loss drivers over the last 12 months have been real estate and international shares, with the latter falling 16.4% in hedged terms, led by an 18% drop in the US market. Funds appearing in both the 1 year and 5 years performance lists are highlighted in "blue".

Australian Director IDs - November 28, 2022

There are a number of Australian expatriates overseas who will need to apply for an Australian director ID. You require an ID if you are the director of:

  • a company registered with ASIC or the office of indigenous corporations
  • A corporate trustee - perhaps of a self managed superannuation fund
  • a registered Australian body, including incorporated associations registered with ASIC, and
  • a charity or not for profit that is a company or aboriginal and Torres straight Islander Corporation

Following the above, there are large numbers of qualifying Australians who need to apply for IDs, and this needs to be done before November 30, otherwise substantial penalties may apply.

In practice, many individuals have yet to make the required application. In fact, the media is currently reporting that, "almost a million Aussies could face a $13,200 fine from the Australian Taxation Office (ATO) for forgetting – or avoiding – a straightforward act."

If the numbers are indeed so substantial, we believe that it is almost unavoidable that the application deadline will be pushed back - but you can't rely upon this happening, and any expats who are qualifying directors need to make applications as soon as practicable to ABRS.

Australian Federal Budget: Items of Relevance to Expats - October 26, 2022

There were a few, if any, measures announced in the most recent Federal Budget of direct relevance to Australian expatriates. This was a conservative, domestically focussed Budget concerned to ensure that it did not add to inflationary pressures and that Australia is well-placed to manage through what appears to be a difficult two year horizon.

However, we would make a few comments regarding what was said, and not said, in the Budget:

  • There was no mention of any introduction of new tax residency rules. As we mention above, this is a very domestic Budget, and therefore while there is some possibility that there is a technical group still working on the introduction of the new tax residency rules by June 30, 2023 the fact that there was no mention in the Budget means that the introduction of new residency rules may have receded to 2024, or later. It wouldn't appear to be a priority of the current Government, and there probably isn't "enough money" in the new measures to justify a high prioritisation.

  • The Government indicated that it would defer the start date of a number of legacy tax and superannuation measures to allow sufficient time for policies to be legislated. These measures include, "the 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs". Again, consistent with the above, the Government is signalling that it doesn't believe this is a priority matter.

  • Not of direct relevance to expatriates, but possibly to those with partners who are neither Australian citizens or permanent residents, the Government indicated that following a doubling of FIRB fees for residential land and property purchases in July, that penalties for non-compliance would also double with effect from January 1, 2023.

Housing Demand in Australia - September 15, 2022

Australian expatriates returning home, and expatriates on assignment to Australia, need to be very aware that Australia, like many countries across the world, is facing a significant housing shortage and care needs to be taken to ensure that you have arranged accommodation well in advance of any arrival.

The table below illustrates that Australia is experiencing .." the lowest national rental vacancy rate since 2006 and is at unprecedented levels both in duration and scope when considering the sustained lack of rental properties over the past six months as well as the geographical extent of the crisis whereby all cities and regions are experiencing rental accommodation shortfalls."*

What has been evident over the last few months has been a particular tightening in Sydney and Melbourne - not yet down to the levels being experienced in the other capital cities - but a clear trend is apparent.

* SQM Research

Land Tax - Queensland introduces a Tax based on Total Australian land values - September 7, 2022

Following a meeting with other state Premiers, it has just been reported that the Queensland Premier, Annastacia Palaszczuk, has decided not to proceed with changes to the application of Queensland stamp duty as summarised below.

Land tax in Queensland is currently assessed on the value of all non-exempt landholdings within Queensland only - it does not take into account any landholdings in other States - as at midnight on 30 June each year. Different thresholds and rates apply to individuals,corporations, trustees and absentees.

Now, based on recent legislation, on and from the year ending 30 June 2023, Queensland land tax will be based on the Queensland proportion of the total value of all the Australian land owned by the landholder - unless a land holding is excluded, with exclusions including "principal places of residence".

These changes are questionable in principle - Queensland as a State Government is attempting to tax individuals on their national assets and it will invariably cause conflicts with other states - and, whilst largely impacting investors with properties in both Queensland and interstate, it may also unduly impact Australian expats. This is because expatriates having a home in Australia and perhaps a holiday home in Queensland, or vice versa, will invariably not be able to claim an exclusion for their principal place of residence if it is rented out.

Government flags some potential flexibility on new tax residency rules - August 27, 2022

Assistant Treasurer Stephen Jones reportedly told an Australian Chamber of Commerce event in Singapore in the week beginning August 22 that the new tax residency rules were in the Government's "in-tray" ahead of the October Budget and the 45 day limit was "being looked into". At least some attempt at communication and dialogue from the incoming Labor government, in very stark contrast to the previous LNP administration.

Any additional flexibility would be good news to many Australian expats working and living in countries with which Australia does not have a double tax agreement, such as Hong Kong. See our page devoted to the proposed new tax residency rules for more background and detail.

Super Fund Performance - July 31, 2022

For Australian expats wondering how their Australian superannuation funds are faring, the answer is that 2021-2022 has been a very poor year for investments returns - as illustrated in the charts below contrasting retuturns for the 10 Best Growth/Balanced funds over 1 and 5 years respectively - funds appearing in both lists are highlighted in "blue". The best performing balanced growth fund over the last twelve months was Hostplus with a return of just 1.6%, with many/most large funds recording negative returns.

With Australian and global equities falling 7% and 12% respectively during the reference period - and, global bonds down by 9.5% and Australian bonds by 10%, delivering poor returns to even defensive investors - the results can even be described as "relatively good".

As we mention elsewhere, Australian expats can continue to invest in super even while overseas but care needs to be taken to ensure that it represents the best investment alternative in their particular circumstances.

Labor election victory: Impact on expatriates - May 23, 2022

The Labor election victory poses no obvious upsides or downsides for Australian expatriates. Labor adopted a "small target" approach to the election and basically mirrored the LNP's position in relation to most tax and financial matters - effectively relying upon the electorate's distaste for Morrison and a decade's worth of inaction on climate change to give them victory, although at an historically low share of the overall vote.

Given that the Tier 3 personal tax changes will proceed, and changes to GST are incredibly sensitive, particularly with significant current cost of living pressures - Labor has left itself with very few options in terms of Budget repair, although multinationals in Australia can expect to be - and should be - the focus of renewed attention in terms of their tax arrangements.

Although Labor can be expected to be more flexible than the LNP when it comes to listening to expatriates regarding the proposed new tax residency rules, particularly the prospect of being considered resident after 45 days in the country, major changes are probably unlikely at this stage and Labor may be disinclined to consider any changes which reduce revenue, given the above comments.

Overall, it's unfortunate that politics has reached a point in Australia where neither major party seems inclined to take the "long view" on policy matters, and seem unable or incapable of selling or communicating complex and difficult matters to the electorate. The hope is that Labor will surprise in this regard and be less purely "transactional" than the last Government.

Important Superannuation Changes introduce additional flexibility for expatriates - February 11, 2021

Recently legislated changes to superannuation, first announced in last year's Federal Budget, provide important additional flexibility for Australia expatriates intending to retire in Australia, and older Australians generally, to make significant additional contributions to their superannuation balance.

The changes, which we were concerned may have been delayed because of the current legislative programme and upcoming Federal election, provide significant strategic planning opportunities from 1 July 2022.

The legislated changes included:

  • removal of the work-test requirement for non-concessional contributions (NCCs) and salary sacrifice contributions, for individuals aged between 67 and 75
  • extended eligibility to make NCCs under the bring-forward rule to individuals aged under 75 at the beginning of the financial year
  • extended eligibility to make downsizer contributions to those age 60 or over
  • removal of the $450 per month minimum income threshold in terms of the application of the super guarantee payment by employers

Note that some of the provisions around age cut-offs are quite specific and subject to balance caps, so professional advice should be sought prior to making any contribution.

Foreign Transfers – Supporting Documentation – September 24, 2021

Whenever we have discussed making foreign currency transfers into or out of Australia we have focused on the need for all individuals and entities to maintain appropriate documentation regarding the source of those funds. That is against the background of regular approaches being made to individuals by the ATO, often based on Austrac information and sometimes months or years after the transfer, seeking to confirm the source of funds.

That position now needs to be stressed further given a recent Taxpayer Alert (TA 2021/2) - Disguising undeclared foreign income as gifts or loans from related overseas entities. The main ATO focus is on the following behaviour:

"....the arrangements with which this Alert is concerned are ones where taxpayers are aware of their residency status, as well as the tax implications that flow from it, but attempt to avoid or evade tax on their foreign assessable income by concealing the character of funds upon their repatriation to Australia by disguising the funds received as a gift, or a loan, from a related overseas entity."

The alert specifically mentions that "genuine" gifts or loans are not the ATO's focus and indicates that they generally have the following characteristics:

  • the characterisation of the transaction as a gift or loan is supported by appropriate documentation
  • the parties' behaviour is consistent with that characterisation, and
  • the monies provided are sourced from funds genuinely independent of the taxpayer.

In terms of what supporting documentation is required for a gift or loan, the ATO indicates as follows::

"Appropriate documentation for a genuine gift will depend on the size of the gift and whether the nature of the relationship is one where gifts might be made in the ordinary course of that relationship. For larger gifts or where there is an atypical relationship between the donor and donee, this might require a contemporaneous Deed of Gift. We would also expect there to be evidence showing the donor's capacity to make the gift from their own resources as well as financial records reflecting the donor's transfer.

Appropriate documentation for a genuine loan would typically include a properly documented loan agreement that evidences the parties to the loan, its terms and relevant conditions. We would also expect there to be financial records showing the advance of funds and repayments of principal and interest."

IMPORTANT: The material contained in this website and other associated communications is only intended as general, background information and must not be relied upon. No warranty is provided in relation to any material or to the services that may be contracted through It is recommended that individuals seek the advice of qualified professionals before taking any action.