FOR many Australians returning home, the excitement of getting back sometimes means they forget to check on the tax aspects of becoming an Australian resident taxpayer once again. Here is a quick checklist for you to consider.
Luckily all cash savings you have accumulated whilst living abroad are tax free on return to Australia. Even if you choose to leave them abroad the capital is not taxable, however you would need to declare any interest earned and possibly currency gains each year while living in Australia.
Shares & Investments
When you return to Australia, any shares or managed investments (including those in Australia which were tax free whilst living abroad) will become taxable however all gains up to the point of return are tax free. For Australian tax purposes, it is treated as if you acquired the investments at the actual market value on the date of return and only profits above that amount may be subject to tax. You will also need to declare any dividends received once you are living in Australia.
Similar to shares, any property you have acquired whilst living out of Australia will need to be valued on date of return and that valuation price will become the Australian tax cost, regardless of what you actually paid for it.
Any rent received will become taxable and you can deduct all cost of ownership including rates and interest on loans. You may even be able to claim building depreciation if the property was built after 1985.
If you lived in the property for a while, then it may remain free of capital gains tax for up to 6 years or until you purchase and live in a family home in Australia.
If you have been renting out an Australian property, any tax losses accrued will now be available to offset your Australian income.
You can get this as a benefit in your annual income tax return or request the Tax Office to allow your employer to make a regular reduction in your salary tax.
If you move back into the house as your residence, it will become pro-rata tax free for capital gains tax, but importantly any mortgage will no longer be deductable once the property is not rented. As such you should make all efforts to reduce the loan on the property you intend to live in as your home as soon as practical on your return. It may well be advantageous to sell off your investment assets to achieve this, but it would be worth seeking advice to ensure this is done with full understanding.
If you can reduce the home loan to a satisfactory level, you could consider redrawing the available funds for further investment in property or shares to help reduce your ongoing Australian income tax.
If you have UK Pension funds then transferring to an Australian fund is usually the best option if it is permitted under the UK Fund rules. Ideally, this needs to occur within six months of return to Australia to ensure no tax consequences.
Business Assets & Offshore Companies
You are entitled to keep interests in foreign business from Australia; however it is important to understand the tax implications. If it is a genuine operation with staff and premises, then only profits drawn may be subject to income tax. If it is just a holding shell, then even profits undrawn may be taxable each year in Australia.
Similar to shares, the business assets need to be valued to establish the market value on return, which becomes your Australian tax cost base.
– This is a quick guide to the main issues affecting you on return. Every situation is different and it is strongly recommended that you seek appropriate advice to ensure you are well protected and informed.
Steve Douglas is the co-founder and Managing Director of Australian Taxation Services (ATS), established in Singapore in 1995. ATS provides specialist taxation services to Australian expats living overseas and people of any nationality investing in Australian property.
Tel: 020 7987 5181
The information here does not represent either general or specific financial advice.