It’s an exciting time. You’re about to start an adventure. Soon you’ll be working overseas as an expat. But before you go, there’s 3 important questions expats need to ask before relocating overseas.
Under Australian law, if you and your family are relocating to another country for more than 2 years, there’s a good chance that you will be considered a non-resident for tax purposes. Once your residency status has been established, there’s a few tax issues you’ll need to address before leaving the country.
Here are three important questions to ask before you go.
1. Will I rent out the family home?
If you choose to rent out your family home when you move overseas, bear in mind that Australia will tax you on the rental income that you generate, even though you may be a non-resident. Australia taxes non-residents on their Australian sourced income. Since your property is located in Australia, the rental income generated has an Australian source.
What about my property costs? Most of the costs of owning and maintaining your property will be able to be claimed as a deduction, including depreciation, mortgage interest, insurance, repairs, rates etc. Depending upon the amount of these expenses, this may reduce your tax liability to a minimal amount or perhaps even nil. Furthermore, in the event of a temporary absence, your family home may benefit from a capital gains tax-free status for up to six years.
2. Capital gains tax – do I want to defer the date I will sell my assets?
Some assets owned by soon-to-be non-Australian residents need to be deemed as sold by the date they will leave the country (with the exception of real estate assets, which are still subject to capital gains tax during the sale period). If you pay tax up to the date your residency changes, the majority of investment assets are not subject to capital gains tax once you are overseas.
You need to decide whether you want to go through with the sale of your assets prior to leaving, or defer it to a later date. Tax liability can be waived when selling your assets by deferring capital gains tax until later.
3. Will my superannuation benefits apply elsewhere?
Check whether any of the superannuation benefits you may have accumulated can be applied elsewhere. If you have a self-managed superannuation fund, you may need to appoint an Australian resident as a Power of Attorney to manage it for you while you are away.
If so, you are required to do this within your first two years of being a non-resident, but ideally you should do this before you go. It is important that you do not contribute to your SMSF while living abroad. If you do, then the compliance status of your fund may be affected and that could be very costly indeed!
If you need some assistance with your Australian tax return before the big move abroad, or any other advice relating to tax, don’t hesitate to get in touch with us here at Expat Tax Services.
- Demystifying PFICs for Australians in the United States - 12/04/2024
- Update: Thailand Clarifies Tax on Foreign Income - 25/11/2023
- Remote Workers – Australia’s Opportunistic Tax Grab - 11/11/2023
