[Australia] Expats have another year to get tax affairs in order

Expat Australians and others considering an overseas job appear to have won at least a year’s reprieve from proposed changes to tax residency rules, Financial Review reports.

A Federal election is expected to be called within weeks, making it all but impossible for the rules foreshadowed in 2021 to be passed into law in time for the next tax year.

The Board of Taxation has long intended to remove ambiguity around when an Australian citizen living overseas is no longer considered a resident for tax purposes.

The new “bright line” tests - including a limit on days spent in Australia - were not mentioned in the budget handed down in Canberra on March 29. But tax advisers predict that the expected changes are now “baked in” and it will be a case of when rather than if they come into force.

“It’s worth comparing this to the changes to the capital gains tax (CGT) principal place of residence rule that affected many Australians living overseas,” Tristan Perry - head of tax, Australia at Select Investors in Singapore - said.

“The CGT Principal Place of Residence changes were first announced in the May 2017 budget. They lapsed when the 2019 election were called but after consultation a new bill was introduced on October 2019 with a grandfathering period till June 30, 2020.

“When the government was criticised for the short period in which taxpayers had to organise their affairs – between October 2019 and June 2020 – it responded by saying everyone had known what was coming since May 2017.

“Accordingly, I think we should expect a change by July 1, 2023. I think the 45-day test will be changed, to 60 or even 90 days, but obviously, that is still unknown,” Mr Perry said.

Business groups in Singapore and Hong Kong have reportedly lobbied the Morrison government to wind back some of the proposed changes, saying they could potentially deter overseas workers from returning home to close some of the skill gaps as employers struggle to fill jobs.

In 2021, the Australian Chamber of Commerce in Hong Kong last warned that the proposed changes could also deter foreign workers, including top executives, from coming to Australia, as in some cases their tax residency could last for up to two years after their stay in the country.

Two-thirds of expats polled by AustCham Singapore said they would reduce travel to Australia under the proposed 45-day threshold, prompting the organisation to suggest Australia might subsequently miss out on opportunities, expertise, leadership and ideas from citizens working in global markets.

Michelle Howell - senior relationship manager at Synergy Financial Advisers - said it was unlikely the tax residency changes would be legislated in time to come into effect before July 1, and she welcomed the “breathing space”.

“This will give people time to plan their financial affairs. I advise my clients to structure their investments in such a way to allow themselves flexibility for any future changes in tax residency.”

Others have suggested that Australians considering working overseas and wanting to cease Australian tax residency should try to secure a two-year contract and a residential lease, rather than chopping and changing between serviced apartments.

A consultation period before legislation would also allow industry time to study the proposed changes in greater detail. This would help ensure the new regime did not yield unintended outcomes.

In the meantime, measures in this year’s budget to address the skills shortage could also smooth the way for expats planning to come home, Ms Howell said.

“The skills and training packages, for example, might be attractive for those considering their options.”

Source: Financial Review

(Links and quotes via original reporting)

Expat Australians and others considering an overseas job appear to have won at least a year’s reprieve from proposed changes to tax residency rules, Financial Review reports.

A Federal election is expected to be called within weeks, making it all but impossible for the rules foreshadowed in 2021 to be passed into law in time for the next tax year.

The Board of Taxation has long intended to remove ambiguity around when an Australian citizen living overseas is no longer considered a resident for tax purposes.

The new “bright line” tests - including a limit on days spent in Australia - were not mentioned in the budget handed down in Canberra on March 29. But tax advisers predict that the expected changes are now “baked in” and it will be a case of when rather than if they come into force.

“It’s worth comparing this to the changes to the capital gains tax (CGT) principal place of residence rule that affected many Australians living overseas,” Tristan Perry - head of tax, Australia at Select Investors in Singapore - said.

“The CGT Principal Place of Residence changes were first announced in the May 2017 budget. They lapsed when the 2019 election were called but after consultation a new bill was introduced on October 2019 with a grandfathering period till June 30, 2020.

“When the government was criticised for the short period in which taxpayers had to organise their affairs – between October 2019 and June 2020 – it responded by saying everyone had known what was coming since May 2017.

“Accordingly, I think we should expect a change by July 1, 2023. I think the 45-day test will be changed, to 60 or even 90 days, but obviously, that is still unknown,” Mr Perry said.

Business groups in Singapore and Hong Kong have reportedly lobbied the Morrison government to wind back some of the proposed changes, saying they could potentially deter overseas workers from returning home to close some of the skill gaps as employers struggle to fill jobs.

In 2021, the Australian Chamber of Commerce in Hong Kong last warned that the proposed changes could also deter foreign workers, including top executives, from coming to Australia, as in some cases their tax residency could last for up to two years after their stay in the country.

Two-thirds of expats polled by AustCham Singapore said they would reduce travel to Australia under the proposed 45-day threshold, prompting the organisation to suggest Australia might subsequently miss out on opportunities, expertise, leadership and ideas from citizens working in global markets.

Michelle Howell - senior relationship manager at Synergy Financial Advisers - said it was unlikely the tax residency changes would be legislated in time to come into effect before July 1, and she welcomed the “breathing space”.

“This will give people time to plan their financial affairs. I advise my clients to structure their investments in such a way to allow themselves flexibility for any future changes in tax residency.”

Others have suggested that Australians considering working overseas and wanting to cease Australian tax residency should try to secure a two-year contract and a residential lease, rather than chopping and changing between serviced apartments.

A consultation period before legislation would also allow industry time to study the proposed changes in greater detail. This would help ensure the new regime did not yield unintended outcomes.

In the meantime, measures in this year’s budget to address the skills shortage could also smooth the way for expats planning to come home, Ms Howell said.

“The skills and training packages, for example, might be attractive for those considering their options.”

Source: Financial Review

(Links and quotes via original reporting)