Arguably, your tax strategies and planning are just as important as which country you’re looking to move to or where your children will go to school. There are significant costs that can come with poor tax planning for expats and you need to be proactive in your approach of tax planning strategies before moving overseas and also before returning home.
Some of the areas that you need to seek Australian expat tax advice on include:
Many Australians, choose to purchase an investment property when living overseas with the intention of using it as their principal place of residence when they return. It’s important to consider tax implications and also the fact that you will not likely qualify for any Government exemptions or bonuses at the time of purchase.
Similarly, if you own a property as an owner-occupier and then move overseas, only to rent that property out, the laws around capital gains tax have recently changed and you could find yourself liable should you choose to sell that property whilst you are a non-resident expat.
If you’ve been living and working overseas and contributing money to a local pension or superannuation scheme, you will need to consider the costs and tax implications of rolling those funds over into an Australian based superannuation fund when looking to repatriate back to Australia.
Similarly, investments in managed funds and their CGT implications can change when your residency status changes.
The most common situation where this occurs is with expats who own Australian property that is receiving rent as this is considered Australian Taxable Income (ATI) and the expenses incurred in holding the property exceed this amount. This can be quite considerable at times especially if the property is a high-quality new dwelling that has large non-cash depreciation deductions allowed under Div 40 & 43 ITAA97.
In this situation, the taxpayer is allowed to carry forward these tax credits to use when required at a later point in time. This could be when repatriating and then earning personal exertion income in Australia, sale of the property and managing Capital Gains Tax or acquiring other property that may be positively geared.
The laws surrounding SMSFs are complex and there are a number of steps you must take to remain compliant. Changes to tax residency could potentially cause the SMSF to become non-compliant and the mooted changes from the 2021 Budget will also need to be considered once they are legislated.
These are just some common examples of what should be considered when looking to become an expat, and is by no means exhaustive. That is why it is always important to seek specialist advice before actually making any significant changes for the expats living in the UK, USA, Hong Kong, Singapore and other areas.