Heading back to Australia after living in Singapore for the last couple of years?
Many worry that money they bring back to Australia will be taxed upon return. This is not true and you can take all of your savings back without any fear. Leave funds overseas if you wish, but you must declare all earnings and foreign exchange gains in Australia yearly if the amount exceeds A$250,000. The original sum is not taxed. Here’s how to handle other common tax fears:
Don’t necessarily sell your assets before returning
Many people feel they need to sell off any assets or investments for fear of past profits becoming taxable. However, only future profits after the date of return will be taxable in Australia.
Selling can reduce your personal home debt, but if you are happy with the asset, then arrange a valuation before your return to confirm the starting value for Australian tax.
Rest easy: Earnings received prior to moving won’t be taxed
Only earnings after your date of arrival and change of tax residence will be subject to Australian tax. If you are paid after moving home, you won’t be taxed if you can prove that the payment corresponds with your employment period overseas.
There are special rules for Employee Shares and benefits and some issues on bonus payments if you stay with the same employer on return. This may mean you have to pay Australian tax and receive a credit for the overseas tax paid. Seek professional assistance if in doubt.
Be careful with offshore savings plans
Australia does have some strong anti-avoidance rules that can tax annual value increases in offshore trusts and savings plans as income – even if they haven’t been cashed in. Be aware of the possible implications of this if you have such accounts.
Transfer pensions within six months of return
If you cash in or transfer any offshore pension plans within the first six months of your return, there will not be tax implications. If it takes longer, then there may be some tax cost to you personally or within the fund you transfer your pension into. Act on it as soon as you know you are moving back to Australia.
Pay off your home before anything else
Consider cashing in investments that will help minimise your personal home loan because home loans aren’t tax deductible in Australia. You can only claim the interest as a cost when it is rented out. It is better to close out any investment to lower the debt and reduce your non-tax deductible cost – rather than leave the investment where the income or gains may be subject to tax without the benefit of offsetting the interest.
Plan your return as early as possible
Picking a good time to sell investments and a favourable exchange rate can make a significant difference to your financial position. So planning ahead can give you flexibility to take advantage of favourable conditions.
From The Finder, May 2016
Brought to you by
Steve Douglas is the Co-Founder and Managing Director of Australasian Taxation Services (ATS). ATS provides specialist taxation services for anyone looking to invest in Australian property, including Australian expatriates living overseas. Areas of specialisation include the Australian taxation aspects of property investment, as well as expatriate and migration planning.