Tax Advice for Expatriate Australians & Migrants

Introduction – Australian Tax Advice

PPB Special Advisory provides introductory information tailored for Australians who are not tax residents, future migrants and working visitors regarding the Australian tax system, and prompt access to professional tax advice through our Inquiry forms.

While a tax resident of Australia individuals are taxed on their worldwide income at a maximum taxable rate of 46.5%. When they become non-resident for tax purposes they become liable only for tax on Australian sourced income – an approach which differs from that of some other countries, such as the US. Hence the importance of tax residency for Australians departing and returning to the country and why we provide some discussion of the various tests used to determine an individual’s status. Residency is very dependent, however, on an individual’s personal circumstances and you are strongly advised to seek professional advice if you have any doubts about your tax or residency status – preferably before you depart for overseas because your status can be affected by your overseas employment terms. This is particularly the case if you are going to be working in the Middle East, where most countries do not levy income tax.

Other areas of common concern to expatriates are the application of capital gains tax (CGT) in relation to property and assets in Australia, both on departure and whilst overseas, and how rental income from property is treated whilst overseas.

In our view, Australian expatriates should have a tax briefing with a professional advisor before leaving Australia and at least several months prior to their return. There are a considerable number of tax complexities and we cannot hope to address them all within the PPB Special Advisory site – although we do provide some general background around the more common taxation issues and a page of tax FAQ’s. Note that some relatively recent changes, particularly in the area of superannuation, where the Government has increased the attractiveness of superannuation but also limited annual contributions, means it is vital that you also plan your superannuation strategy since it may involve making contributions whilst overseas and prior to your return to Australia.

Most Australian tax advisors have a very domestic focus and it is important that you utilise tax advisors who are focused and experienced on expat tax matters to ensure that you receive full and complete advice.

Complete this Inquiry form:

 


 

Australian Temporary Visas – Tax and Financial Hints

457 and Other Temporary Visas – Tax and Financial Hints

Australia has a complicated tax and social security system. Temporary residents on 457 visas, and other similar visas, are often at a financial disadvantage because of their lack of familiarity with this system; the following notes summarise a number of areas which should be of interest and potentially save visa holders many thousands of dollars over the period of their time in Australia:

1. Living Away from Home Allowance (LAFHA)

LAFHA is an allowance paid by an employer which reduces your taxable income to compensate you for working on a short term basis away from your normal place of residence. Most temporary visa holders previously qualified for this allowance because they are intrinsically living away from their usual place of residence. There are two components to this allowance; food and accommodation. The proper use of this allowance could significantly increase take-home pay – however, changes introduced with effect from 1 October, 2012 effectively make it impossible for temporary residents (already resident or otherwise) to claim LAFHA – please read our commentary for further details. Relatively little tax planning opportunities remain available for temporary residents, although depending on their circumstances purchasing a car through a novated lease, rather than directly, can be tax effective.

 


 

2. Medicare Levy and Medicare Surcharge Levy

Most Australian taxpayers pay an additional 2% tax or Medicare Levy, in addition to income tax, to fund the national health system, Medicare. Further, a Medicare Levy Surcharge (MLS) is levied on payers of Australian tax who do not have private hospital cover and who earn above a certain taxable income – see the payments tiers for the 2014/15 tax year in the table below.

 

Tier

Taxpayer

Taxable Income and Reportable Fringe Benefits ($)

Surcharge Rate

1

Single
Couple/Families

90,001- 105,000
180,000 – 200,000

1.0%

2

Single
Couple/Families

105,001 – 140,000
210,001 – 280,000

1.25%

3

Single
Couple/Families

140,001 and over
280,001 and over

1.5%

 

 

If you are a visa holder who does not qualify for Medicare coverage under the various reciprocal health care agreements then you can claim an exemption from this levy and a refund. Note that you must arrange suitable private health insurance as part of your visa requirement and this can be arranged online: 457 visa health insurance.

The refund can be quite significant and you can claim this at the end of each tax year in your tax return, or even once you’ve left the country if accompanied by amended tax return(s). The process is quite cumbersome, requiring an individual exemption application for each tax year and passport certification but we simplify the process as much as possible. Our fees for managing this process are 20% of any rebate, subject to a minimum $200 charge, and this includes transferring refunds to any nominated Australian or overseas bank account.

 


 

3. No Taxation of Offshore Income

Most temporary residents are exempt from Australian taxation of non-employment income earned outside of Australia. Depending upon your finances, this can be extremely attractive – with interest and investment income earned offshore potentially not attracting any tax. Many people see temporary visas as part of a progression to Australian permanent residency and citizenship; depending upon your finances and other family considerations it may not pay to rush this process. Again, very much an area where you should seek professional tax advice.

 


 

4. Departing Australia Superannuation Payment (DASP)

While in Australia your employer will normally be required to make a contribution to a superannuation scheme – this is called your Superannuation Guarantee.You can claim the payments made by your employer into a superannuation fund or retirement savings account once you permanently leave Australia and your temporary resident visa has expired, or been cancelled – although the amount is subject to a 38% tax. Making a claim is simple and can be done online at the Australian Tax Office website.

 

 

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