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Commentary on Issues impacting Australian Expatriates

Government Urged to Change Proposed New Tax Residency Rules – October 16, 2021

Australian business groups, particularly in Hong Kong, are actively lobbying the Federal government to change aspects of the proposed new tax residency rules, which we have summarised in detail on this site, because of significant negative tax consequences. Their concerns center largely around the prospect of Australian expatriates being considered Australian tax residents if they spend 45 days or more in the country in one year - and the prospect of double taxation if they are resident in countries (or regions) such as Hong Kong, where there is no double tax agreement.

As we mentioned earlier this month, see below, there have been no public announcements, such as draft legislation, regarding the new rules which are supposedly to be in place by 1 July 2022.

Expats are reminded that it was the LNP government that – for no clear reason - doggedly pursued the recent adverse, discriminatory changes to capital gains tax on main residences, and indeed back in 2012 remove the capital gains tax discount from non-residents. The Government's clear view is that expats don't vote and therefore have "no leverage". However, the Government is however under pressure on multiple fronts, given its inability to manage the Covid vaccination rollout and Net Zero, with an election pending in May 2022- so the "pips might be starting to squeak" and consistent pressure may bear fruit.

New Tax Residency Tests - A quick summary of where we are - October 12, 2021

No draft legislation or proposed start date as yet.
No transitional rules for individuals qualifying as non-residents under current rules
Counting days in Australia will be critical under the 183 day test.
The issues will be primarily in the ceasing residency test; the commencing residency test is not a radical departure from the existing position.
The Board recommendation that where an Australian is treated as a resident of another country under one of Australia’s comprehensive tax treaty arrangements the individual should also be treated as a ‘non-resident’ for domestic tax law purposes should be applauded and will simplify many issues going forward, if enacted.
The concept of "adhesive residency" means that the longer an individual is a tax resident the more difficult it is to cease residency. Clearly it will be more difficult for long term residents to break Australian tax residency and a number of mismatches will occur - for example, some members of a family may break residency, while others remain resident.

Australia and Covid 19: A tale of two halves - October 5, 2021.

For expats that continue to be frustrated at the constraints on entering and leaving Australia and looking for an explanation, it is simply a consequence of inadequate vaccination procurement by the Federal government, followed by a poor vaccination rollout campaign. The chart below demonstrates how Australia ranks in terms of other developed countries, and the degree of disparity between the various states and territories. Note that these numbers are based on a percentage of total population, not the "percentage of individuals aged over 16" - which is the measure commonly used by the Federal government, for obvious reasons.

In short, Australia had a tremendous "first half" when lockdowns and quarantine processes - initiated largely at the instigation of the States - placed Australia in a leading position in terms of managing the Covid 19 outbreak, followed by a catastrophic "second half" characterised by short-sightedness and consistent mismanagement at the Federal government level in almost every aspect of the process.

Australian Mortgages - Additional Controls likely to be introduced - September 28, 2021

Following comments made by the Federal Treasurer in late September, 2021 we expect that additional controls which will shortly be introduced on home lending. Apart from the surge in house prices over the last 18 months, the regulators have become increasingly concerned about the general level of indebtedness.

The expectation is that controls will focus on debt to income ratios - perhaps limiting debt to six times an applicant's household income. Whether this will directly impact expat mortgage lending is difficult to foresee at this stage, but these type of changes have previously resulted in "stoppages", while clarity is sought in terms of how the changes impact expats. They have also previously resulted in financing and price surges as individuals seek to accelerate their purchasing to avoid the limitations.

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."

Retiring into Malaysia? Perhaps time to think again – September 8, 2021

For Australian and other expats looking to retire into Asia, Malaysia has previously been one of the more attractive options - with a well structured foreign retiree program called "Malaysia My Second Home" (MM2H).

However, that programme was frozen in July 2020 on the basis that that it would be reassessed, and only recently has the Malaysian Government announced a reactivation in October 2021, but with significantly increased eligibility criteria and an announced intention to focus on "wealthier foreigners". See the table below for more details.

These changes are entirely within the Government's prerogative, but our major issue is that the new criteria are apparently going to be applied to existing visa holders. So, for example, after a period of one year's grace, existing visa holders will apparently need to demonstrate that they have monthly available income of RM40,000, rather than the RM10,000 required previously. That's a 400% increase in the minimum income required, and the fixed deposit that needs to be paid into a Malaysia and bank has increased in some cases from RM150,000 to RM1,000,000 - a near 700% increase.

If this news is correct, and we would dispute whether Malaysia is attractive enough to compete on the new criteria with other destinations, we regard it as unethical for the Government to apply these obligations to existing holders. They should be "grandfathered" and either left to continue on until the end of their visa, then either meeting the new requirements or leaving the country. Either way, retiring into a country requires trust and stability in the local Government, and that no longer exists in Malaysia.

We can no longer recommend Malaysia as a retirement option and indeed we project a high probability that the new rules will fail, and be subject to reversal/review with 12 to 24 months. Even should that be the case Malaysia has done irreparable damage to its damage as a retiree destination, and perhaps intentionally.

High asset prices everywhere, where to invest? - September 7, 2021

As we have described previously, there has been a tremendous run up in most asset classes in Australia - and indeed in most parts of the western developed world - reflecting historically low interest rates. The table and charts below illustrate astonishing increases in capital city house prices over the last 12 months, without exception, and indeed for the first time in living memory these sorts of prices have also extended to larger regional towns.

There is only just now the impression that price rises are topping out, with affordability stretched at almost every point in the price scale, and justifiable concerns around what would happen if inflation were to return and interest rates (perhaps dramatically) increase.

The only thing that we can perhaps stress in relation to house prices is that it supports the contention that we've had for well over a decade that Australian expatriates should always maintain, unless there is a clear intention to remain overseas permanently, some exposure to the residential property market in Australia. This is both as a hedge against price increases such as those we have seen lately and also to adverse foreign exchange movements.

In terms of the Australian equity market, the market has bounced back nearly 50% from the plummet which initially followed the beginning of the Covid pandemic in March 2020. Perhaps more interestingly however, the market is only up just under 10% on the market high that preceded the market correction in March and, if you remember, the ASX had just recovered to pre GFC index levels - taking nearly a decade.

So, there is an argument that says that the ASX is not nearly as stretched as the property market. However, although on almost every metric it is not as stretched as a US market, it still mirrors movement in that market very closely and is exposed to a major US correction.

Expats who are long on cash at the moment and worrying about re-entry at some stage should probably be focusing on the flexibility it provides, rather than whether it represents a lost opportunity.

Migration Approach needs a Thorough Review - August 8, 2021

Recent media reports suggest that nearly 15,000 permanent and temporary resident visas have been granted by the Federal Government since Australian borders were closed 15 months ago. These "business innovation" and "investment" visas typically require applicants to invest millions of dollars in personal or business assets in Australia, but have been very controversial in terms of their real value to the country.

More controversially, they seem to have allowed access to the country without the need for an exemption, whilst Australian expatriates have been unable for a variety of reasons to return home.

A relatively recent report Grattan Institute showed that the majority of Australians generally supported continuing migration, but the majority also thought that migration rates - currently reduced by virtue of the pandemic - were too high.

In these circumstances, why does the Government continually push migration even during a pandemic? Simply because it's an easy, lazy way to post economic growth.

We have significant doubts about the (net) value of innovation and business investment visas, compared to a focus on skilled, young professional migrants - a clear, economic rather than political, re-evaluation of Australia's whole migration apparatus is very much needed.

Australian residential housing: price forecasts 2021 and 2022 - July 26, 2021

NAB have recently revised upward their expectations for residential house prices in 2021, and slightly lowered their expectations in 2022.

The figures for 2021 are in any context very large, and we are not sure to what extent the recent lockdowns in Sydney, Melbourne and Adelaide will have impacted market sentiment going forward. We think these represent expectations at the upper end of the scale, but while almost nothing would surprise during the Covid pandemic, certainly affordability must be weighing very heavily on the market. Gravity will eventually prevail.

Australia, not opening any time soon! - July 2, 2021

For Australians overseas, and expats in Australia looking to move overseas again, recent figures released by the Federal government make depressing reading.

Australia's response to Covid can be viewed in two halves. The first half saw a quick move to lockdown the country and impose strict quarantines insulate Australia from most of the impact of Covid 19, except for a savage lockdown in Melbourne for several months. Much of that good work how now been undermined in a "second half" that has seen glacially slow vaccination rates as a result of poor decision making and, to a lesser degree, bad luck.

The embarrassment has been so great the Federal government has taken extreme measures to deny access to high resolution data regarding the progress of the vaccination campaign. Only in the last few days has the Federal government released official figures confirming that only 8% of the population was fully vaccinated as at June 30, with a further 22% partially vaccinated.

As a consequence, National cabinet today is likely to significantly reduce the number of people entering Australia, restricting again the ability for many expatriates to return home.

Australian residential property prices boom in fiscal 2021 - July 2, 2021

Like much of the developed world, driven largely by historically low interest rates, Australia's housing market has been on an absolute tear throughout most of the Covid 19 pandemic - with even regional markets also seeing significant price increases.

Recent Corelogic figures - see the chart below - indicate that real estate prices across Australia rose on average 13.5% last financial year and perhaps the only slight glimmer of relief is that prices increases at the top end of the market are beginning to decelerate - possibly as banks begin to try and constrain their exposure - and the AUD has softened slightly against most currencies.

Despite recent tax changes impacting expats, particularlywith respect to capital gains tax on main residences, these significant increases are the reason why we still think it's appropriate for most Australian expats to try and retain an exposure to the residential property market in Australia while overseas - both as a hedge against property market movements and foreign exchange movements.

Super Fund Performance - June 16, 2021

For Australian expats wondering how their Australian superannuation funds have fared through the Covid pandemic, the answer is that most have shown very high levels of investment return - mirroring equity performances in Australia and worldwide.

The charts below list the best performing balanced funds over 1) the financial year to April 30 and 2) over the five year period to April 30, 2021. A number of funds, highlighted in blue, feature in both lists.

2021 Australian Federal Budget: Expatriate Impact - May 12, 2021

There were a number of tax and superannuation changes announced in yesterday's Federal Budget that have direct and indirect impacts on expatriates. We have provided a summary below and will follow-up in more detail when more information becomes available.

Tax Residency Rules

The Treasurer announced a "simplification" of individual tax residency rules, wherein individuals who are physically present in Australia for 183 days or more in any income year will be an Australian tax resident under the primary test, and those who don't meet this criteria will be subject to a secondary test.

The announcement reflects recommendations made by the Board of Taxation in 2019. As we mentioned at the time, these recommendations reflect similar changes made in the UK and much is going to depend upon the precise factors that will be utilised to determine residency. There does however appear to be a focus on the rules surrounding individuals becoming resident, rather than breaking residency - which is often the focus of advice for expatriates.

Regardless of the fact that little or no detail regarding the new residency rules was contained in the Budget papers (despite media reports to the contrary), they are destined to come into effect from 1 July 2021 - this year. Given the Government's previous disregard shown for expatriates - in terms of the implementation of CGT rules around main residences - expats shouldn't necessarily expect a balanced process.

Relaxing residency requirements for self-managed superannuation funds

The Government intends to relax the residency requirements for SMSFs and SAFs by extending the "safe harbour" for the central management and control test from 2 to 5 years for SMSFs and removing the active member test for both fund types. The changes are intended to take effect from 1 July, 2022. We are supportive of the changes but again the devil will be in the detail, and ascertaining whether the changes also provide more flexibility around, for example, establishing SMSF's whilst non-resident.

Reducing the eligibility age for downsizing contributions

Not necessarily of direct importance to expatriates, nonetheless the "downsizer contribution" can make it easier for expatriates to make substantial conbtributions to their super on returning to Australia, if they have retained a qualifying main residence in Australia. The downsizer contribution allows people to make a once off, non-concessional (post-tax) contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home.

The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age from, "the start of the first financial year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022."

Australian Residential property - Defying Gravity? May 8, 2021

A supportive tax environment, including a full capital gains tax exemption for main residences, and the ability to negatively gear investment properties, together with a (recent) low interest rate environment only partially explains that the decade-long surge in Australian residential property prices. At the present time, the value of Australian residential property is now around four times the size of the Australian GDP, and exceedis the combined value of the Australian ASX, superannuation funds and commercial real estate stock.

As an expatriate who spent 20 years overseas, listening to experts at the time say that a substantial fall in real estate prices was inevitable, it's hard to understand how prices have resisted economic gravity. In retrospect, part of the reason was the the 30 year long period of economic growth, buoyed by high levels of migration, but a substantial part has been played by a very unique national obsession with property as an investment and store of value. Politicians who have sought to address the clear imbalances and distortions this causes within the economy - such as Labor at the last election - have not been rewarded by an electorate that clearly votes with its wallet.

Indeed, the coming Federal Budget will probably see further measures to support real estate prices, and even the Reserve Bank has recently indicated a degree of comfort with booming property prices - although that may not last long because a sudden increase in interest rates would very significantly dampen both prices and economic demand.

What does this mean for an expatriate? It simply means that despite recent changes in tax policies, such as denying the capital gains tax main residence exemption for non-residents, which we regard as clearly discriminatory, you should usually seek to retain a residential property in Australia when going overseas to provide a hedge against both domestic real estate price increases and adverse changes in foreign currency exchange rates.

You can take the view that Australian property prices are too high, and that you stand a good chance of buying back in a lower rate when you return to Australia - that may be a rational approach, but as we mention above, Australians don't appear to be rational about residential property and it would be a bet against a long term trend.

Retirement Income Review report – November 21, 2020

The Retirement Income Review report which was released on Friday, November 20, after having been with the Government since July. The Report was commissioned to provide a fact base on which to proceed with further policy developments in relation to retirement incomes, including superannuation and pensions.. The review was specifically precluded from making recommendations, obviously to provide the Government with as much manoeuvring room as possible.

There was little in the report of significance for expatriates, but we would flag the following issues:

The Review increases the likelihood of the government pausing or discontinuing plans to increase recurrent superannuation guarantee level beyond the current 9.5%. The Review takes the view that an increase in the SG is likely to reduce real-time wages and that any increase in the SG will likely accrue largely to higher income earners.

The Review is critical of the continuing large number of high-value superannuation funds in Australia - there are apparently more than 11,000 people with more than $5 million in superannuation savings, attracting a significant cost in terms of tax concessions. These are viewed as largely tax minimisation structures, excessive in terms of meeting retirement incomes, and it seems likely that further restrictions will come into place in terms of the tax treatment of high balance funds.

What's happened to Australian expats who have returned home - November 14, 2020

Despite historically high levels of unemployment in Australia, a survey carried out by Advance suggest that about 60% of returning expats have either found new employment in Australia (32.4%), are now working remotely for their existing overseas employer (18%) or have been transferred to the Australia payroll of their employer (9.9%).

Conversely, around 40% are looking for a job, building their own business or pusuing investment opportunities, and they would have experienced profound changes on their return.

The media tend to focus on success stories and our experience has been that most Australian firms are parochial in their recruitment, at the best of times. Consequently, we think these figures are likely to underestimate the difficulties experienced by many expat families, and perhaps the quality of jobs acquired.

However, in the present environment, health and security trumps short term career issues and we are glad to have them safely home, if perhaps temporarily for some.

Major changes in the Australian mortgage market – November 7, 2020

Expats should be aware of two major dynamics impacting the Australian mortgage market at the moment.

Firstly, and most will be aware of this, historically low interest rates are now available in the market - indeed, following this week's RBA market meeting, the major banks are now offering four year fixed rates as low as 1.89%.

Secondly, and less obviously, fixed rate loans are now substantially cheaper than variable-rate loans, as a result of cheap term financing now available to the banks from the RBA - see the chart below. Moving from variable to fixed rates can be attractive, but expats need to bear in mind that you are basically committed to your lender for the period of the loan, with substantial break costs involved with any exit. Additionally, the lenders will typically substantially limit the maximum amount of any extra repayments during the period of the loan. This is typically less of an issue for expats, where accelerating the repayment of loan is not always tax advantageous.

As we mention elsewhere, remember that expats do not have access to all Australian mortgages and lenders; more details are available on our Mortgage page.

Interest rates – "lower for longer" – October 18, 2020

A recent speech by the Governor of the Reserve Bank, Phil Lowe, has been seen as clearly indicating that interest rates will be further reduced at the next RBA meeting, and that there will be a continued easing of monetary policy over the medium term. The Governor also indicated that he saw rising asset prices as "constructive in the context of providing jobs".

That translates to a situation in which interest rates are likely to fall further, zero is within reach for deposit accounts - a situation which many Australians overseas will be familiar with - and the RBA's greater comfort with rising house prices. The latter also has to be seen in the context recent moves by the Government to make lending more accessible.

Consequently, in the absence of Australia falling off the financial cliff in the early part of 2021 as job support programs are peeled back, we may very likely see a significant increase in property investment. For Australians overseas that means two things - firstly, we again suggest that you look to review your current mortgage arrangements to ensure that they are competitive, and secondly, substantial falls in the local real estate market have become less likely. Note that the Australian dollar will likely weaken in response to these moves and that is clearly one of the RBA's objectives.

The 2020 Federal Budget - A "Non-Event" for Expats - October 7, 2102

As expected, the Federal Government announced a very expansionary budget to offset the economic impact of Covid 19. There were no elements of the Budget that had any specific impact on expatriates, except an announcement that self managed super funds may be able to increase the maximum number of members from 4 to 6 - potentially making it easier for expats to maintain a complying SMSF when they leave Australia.

The Budget included a bring forward of tax cuts originally scheduled over the next 3 to 4 years backdated to July 1, 2020 - and we have summarised impact of those tax cuts on the table below.

Taxable income
2017-2018
Tax Liability
2020-2021
Tax Liability ($)
Change in Tax ($)
Change in Tax (%)
40,000
4,947
3,887
-1,060
-21.4
60,000
12,147
9,987
-2,160
-17.8
80,000
19,147
16,987
-2,160
-11.3
100,000
26,632
24,187
-2,445
-9.2
120,000
34,432
31,687
-2,745
-8.0
140,000
42,232
39,667
-2,565
-6.1
160,000
50,032
47,467
-2,565
-5.1
180,000
57,832
55,267
-2,565
-4.4
200,000
67,232
64,667
-2,565
-3.8

The Australian Housing market - Alice in Wonderland continues - September 10, 2020

Long-term expatriates tend to shake their head in bemusement at the Australian property market, unsure as to whether it actually takes any notice of conventional economics. And so it seems to continue, you would have perhaps thought that in the middle of a global pandemic, with Australia projected to be in its first (significant) recession in 30 years and rising unemployment, that real estate prices - always thought to be overvalued in Australia - would have been badly impacted.

However, a combination of very low interest rates and a marked reduction in real estate listings - see the table below - have combined to result in the market seeing very little in the way of price reductions, apart from the apartment market in certain areas and Melbourne real estate generally, and a "recovery" is tipped for 2021. We are a little more sanguine - there is an unprecedented amount of government driven liquidity in the economy, courtesy largely of JobKeeper and, with unemployment rates inevitably rising, we think there are significant downside risks apparent in the second quarter of next year as the stimulus unwinds.

Australian Life Insurers refuse cover for Expatriates - September 8, 2020

At the current time it is our understanding that no Australian life Insurer will provide individual life insurance cover to expatriates. In the past, Insurers have declined to provide cover where expatriates have been resident in countries where the Australian government has advised citizens “not to travel or reside”; referred to as DFAT level 4. Now that all countries outside Australia now fall into DFAT Level 4 Insurers have taken the approach of refusing cover for anyone outside Australia.

More remarkably, cover is being refused if there is any intention expressed to travel outside Australia, whether permanently, for business purposes or for tourism - even though Covid 19 related illnesses would be specifically excluded in any cover. Talk to your employer if you are going on a work assignment just to ensure you have appropriate levels of cover and, if you are already outside Australia, your only available option may be to arrange cover through a local Insurer. Whether this is a real or good option will depend on your country of residency.

Time to consider tax residency again - August 11, 2020

During May, in the commentary below, we discussed how as a consequence of the Covid 19 pandemic the ATO had indicated that it would take a more flexible approach to the issue of tax residency as it affected people who needed to stay in Australia, or were effectively trapped because of travel restrictions.

Now that it is becoming clear that Covid 19 is not going to be temporary phenomena, and travel restrictions may not lift until early next year, the ATO is beginning to signal that this flexibility is on the wane, and individual should begin to normalise their tax arrangements. Consequently, we would advise anyone to might be significantly affected by being considered resident for Australian tax purposes, to seek individual professional advice regarding their position.

"Tracksuit man and Lululemon lady" - Career advice for returning expatriates - July 15, 2020

The Australian press today contained an article quoting an executive recruiter who warned that returning expatriates need to manage their salary expectations or risk becoming "tracksuit man" or "Lululemon lady" - "Tracksuit man" in this situation is a man sitting in a coffee shop thumbing through the Australian Financial Review because they haven't got a job. The recruiter also went on to add that, "The trouble is, though, not all of those candidates fit back into this market. They've got giant egos, expectations about either their capabilities or the economics that don't match the local market."

We don't necessarily like the language in which the opinion is expressed, but recruiters should provide candidates with honest advice and it is indeed important for returning expatriates to be realistic about their job options in what is a very tight market. We also don't agree about the reference to egos - obviously this can be an individual problem, we've all seen that, but we think the more endemic problem is the parochial nature of the Australian labour market and its participants, at all levels, including recruiters and their clients.

However, most returning expats have little if any leverage and need to be intensely practical - and that includes considering other options, if their financial position allows, to alternatively spend their time improving professional qualifications or initiating start-ups.

Meanwhile, maintaining networks is obviously important, but expats should try and ensure that any contact with recruiters is limited to those with some direct experience of being an expatriate themselves - it at least suggests they will have an open mind regarding the value of an expatriate's work experience.

With Interest rates at historic lows, many expats should consider re-financing their mortgages - June 21, 2020

We often find that Australian expats, particular long term expats, have very uncompetitive mortgage arrangements - usually as a consequence of inertia and the perceived, rather than real, difficulty attaching to the re-financing of their mortgages. It can be more difficult to re-finance than arrange an original mortgage, largely because of the reduced number of lenders, but re-financing is rarely problematic.

With current mortgage rates at historic lows - see the table below showing indicative interest rates - many expats are missing an opportunity to make substantial savings. Please feel to make an Inquiry to our mortgage broker and note that no cost or commitment attaches; the lender pays all fees in Australia.

Type of Mortgage
Interest Rate
Standard Variable Rate - Owner Occupied (P & I )
2.79% p.a.
Standard Variable Rate - Investment (P & I)
3.27% p.a.
Fixed Rate Home Loan - Investment (P & I) - 5 years
2.69% p.a.

Covid-19 and Tax Residency - ATO flagging some welcome flexibility – May 5, 2020

The ATO has indicated that it may take a flexible approach to individuals who need to stay in Australia because of Covid 19 restrictions, when it comes to assessing their tax residency status.

Some comments in relation to individuals returning to Australia as a result of Covid 19 are included on the following pages and include the following FAQ;

  Question: Will my tax residency for tax purposes change as a result of me returning to Australia due to COVID-19?
 

Answer: Whether you are a resident for tax purposes in Australia is a question of fact that requires consideration of your circumstances.

If you are here temporarily for some weeks or months because of COVID-19 then you will not become an Australian resident for tax purposes as long as you:

  • usually live overseas permanently
  • intend to return there as soon as you are able to.

However the tax residency issue may be more complicated if you:

  • end up staying in Australia for a lengthy period
  • do not plan to return to your country of residency when you are able to do so.

We appreciate that there will be unique situations with a range of potential tax outcomes. We will update and may revise this advice progressively as events unfold.

Additionally the Commissioner of taxation recently issued a statement to the tax profession which included the following comment:

"Also, if coping with COVID-19 is causing theoretical tax issues for you or for your clients, let us help. You don’t need to agonise over academic, technical arguments: contact us, and we’ll try our best to give pragmatic, practical advice. We’ve already done this on a range of issues, from central management and control, to SMSF residency issues, to expat tax issues."

In summary, much will obviously depend upon individual circumstances, but the ATO at least flagging that they intend to approach particular situations in a flexible and pragmatic fashion.

Overseas Redundancy and Taxation - April 3, 2020

The coronavirus pandemic has resulted in an unprecedented level of dislocation for Australian expatriates, with many returning home after having broken service with Australian and overseas employers. It's important to remind individuals to seek appropriate tax advice regarding those payments, because the proper management of those payments can have a significant impact on how they are taxed in Australia.

Further details are available on our page devoted to the taxation of redundancy and separation payments, and I've repeated a paragraph below:

"Ensuring that these payments are made on a tax effective basis will often involve direct communications between a tax professional and an individual's employer - with a view to ensuring any payment relating to overseas service meets the ATO's requirements. Note that even if the employer does not agree to making a payment on a tax exempt basis it may be possible to pursue a later refund from the ATO if a separate payment has been arranged. Prior professional advice is absolutely recommended before the receipt of any redundancy related payment."

Discriminatory Main Residence CGT Legislation becomes Law - December 29, 2019

On Wednesday, October 23 the Assistant Treasurer, Michael Sukkar, reintroduced legislation to:

"remove the entitlement to the CGT main residence exemption for foreign residents other than where certain life events occur during the period that a person is a foreign resident where that period is six years or less"

The original Bill, which sought to deny the CGT main residence exemption to non-residents, including Australian expatriates, officially lapsed on July 1, 2019. The fact that the Morrison Government re-introduced the legislation removes any suggestion that extending the legislation to Australian expatriates, rather than just foreign investors, was a mistake or "unintended consequence".

The new Bill passed the House of Representatives on Wednesday, November 27, the Senate on December 5 and received Royal assent on December 15. Consequently, many expatriates will be denied the ability to claim the CGT main residence exemption, in part or in full, from July 1, 2020.

The Government's dogged pursuit of a this policy, which treats Australian citizens differently depending on where they are resident, simply because one pursues job opportunities overseas rather than domestically, is just inexplicable. The legislation should have been confined to foreign investors in Australian real estate, not to citizens and permanent residents. As a member of the Australian Tax Institute was quoted as saying in the media, "There is no legitimate policy reason for denying Australian citizens the CGT main residence exemption in these circumstances."

What is even more inexplicable is that the Labor opposition supported the new legislation on the basis that, "The original measure, as part of the 2017 budget, had some flaws, including its potential impact on expats and New Zealanders living in Australia. Labor is glad the flaws will now be fixed. This is a good measure that provides important revenue for the budget." Consequently, Labor are happy to protect expatriates on assignment in Australia but not Australian citizens on assignment overseas!

The Government's approach is possibly a reflection of the fact that the entire extent of the Prime Minister, Treasurer and Assistant Treasurer's overseas work experience appears limited to a two-year assignment by the Prime Minister in New Zealand twenty years ago. In any event, we summarise the new legislation in more detail on our CGT main residence exemption page. We stress that expats impacted by the legislation should carefully consider obtaining professional advice regarding the precise impact and options available - as soon as practicable.

We continue to take the view that all the Australian expatriates consider expressing their displeasure for these intended changes either through direct contact with the Prime Minister's office, or Treasurer's office, or more practically through the various Australian Chambers of Commerce. At the present time, however, the Government appears immune to reasonable discussion and it might be appropriate for Australian expatriate organisations to immediately withdraw hospitality and support to visiting members of the Government until there is a sense that the Government is prepared to explain why a discriminatory approach to expatriates is fair and reasonable.

RBA confirms: Australian banks still (far) too expensive for International money transfers - December 11, 2019

In an address to a Sydney conference on December 10, the Governor of the Reserve Bank, Philip Lowe, confirmed our previous advice, and the personal experience of many expatriates, when he indicated:

"The main results are summarised in this graph (Graph 6 below). In nearly every case, the major banks are more expensive than the digital MTOs. For the major banks, the average mark-up over the wholesale exchange rate is around 5½ per cent, versus about 1 per cent for the digital money transfer operators (MTOs)."
RBA: Cost of International Money Transfers from Australia

In the absence of special circumstances, for example access to commercial rates, expatriates will normally be better placed - both in terms of fees and exchange rates - using specialist foreign currency transfer companies rather than Australian banks, and should "shop around" - subject to ensuring that any service has appropriate financial licences.

Australian Management – "thy name is parochial" - September 14, 2019

From the date that this website was established, over 15 years ago, we have been highlighting the parochial nature of Australian companies and their management when it comes to the employment of returning expatriates. Recent research commissioned by Advance, suggests that nothing has changed in the interim period, and that is perhaps why Australia's commercial engagement with the rest of the world, and particularly Asia, isn't what it should be.

Some the major survey results include:

  • 73% of returning expatriates believe that Australian businesses are generally reluctant to hire Australians who worked overseas
  • 83% of HR respondents "are reluctant or cautious about recommending returning expatriates for Australian base roles", and
  • 35% of HR respondents believe recruiting returned Australians is more difficult than it's worth.

Apart from suggesting that the status quo remains, this means that returning expatriates should not generally rely upon recruitment advisors or agencies, who will always take what they regard to be the "line of least resistance". Care, wherever possible, needs to be taken to maintain personal and professional networks in Australia - and you need to honestly factor in the career risk of accepting an international assignment when considering any offer.

Of course, not all companies or industries are the same, and some welcome and foster international experience. However, it sadly remains the case, despite all the intervening years, that the seasoned, internationally experienced expatriate is likely to be asked, as one of their first questions, "what is your network like in Melbourne and Sydney?" Rather than what is your network like in Hong Kong, New York and London, or focusing on what new experience they might be able to bring to an employer.?

HELP, VSL and TSL Debts - ATO Data Matching - Australians Overseas - July 10, 2019

On July 5, 2019 the ATO announced that a data matching program would obtain information from the Department of Home affairs (DHA) regarding individuals with existing HELP, VSL and TSL debts. The ATO will match this information, "... against ATO records and other data we hold to identify debtors that may not be meeting their registration lodgement and/or payment obligations."

The data items that will be obtained - and the suggestion is that up to 3 million individuals might be involved in this process - are:

  • Identifying particulars for the HELP, VSL and TSL debtor population (name, date of birth, ATO/DHA identifiers).
  • DHA overseas movement details (Passport number, passport country of issue, offshore status, departure and return dates) held on DHA system.

We believe that a substantial number of Australians overseas are still not meeting their commitments with respect to student loans, probably because of the perceived "hassle factor" and the relatively awkward nature of the process. Regardless, we strongly recommend that you ensure that you are meeting any requirements and avoid being approached by the ATO. For more details see our page on Repayment of Help Debts.

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