Are you an Australian who is considering moving to Singapore?
If so, then understanding the basic tax differences between Australia and Singapore will be important.
In this article, we’ll outline below some of the key tax and financial differences between the Australian and Singaporean systems below for you. This information is intended to be general information only in order to provide you a basic overview of the issues. If you require detailed information we recommend that you seek advice from appropriately qualified advisors.
Read below to learn more about some of the tax and financial issues to consider when moving to Singapore.
Tax basics for Individuals Moving to Singapore
The most striking difference between Australia and Singapore is that whilst Australia taxes it’s residents on the basis of worldwide income, with very few exemptions, Singapore taxes it’s residents on a territorial basis.
This means that only income that accrues in Singapore, or is derived from Singapore is taxable by Singapore. Income derived from foreign sources is generally only taxable in Singapore if it is received by an individual who is a tax resident of Singapore and who earned that income via a partnership (based in Singapore).
Another striking difference between Australia and Singapore, is the lack of other taxes such as the absence of Capital Gains Tax (CGT) in Singapore and the lack of taxes generally, on investment income. Additionally, when it comes to their highest tax tier, tax rate in Singapore are dramatically lower than in Australian rates, and the thresholds at which the maximum tax rate kicks in for Singapore is almost (but not quite) double that of Australia’s highest threshold.
So, if you weren’t wondering it before, now you’re sure to understand why Singapore is such an attractive place for Australian expats to live and work for extended periods, if not permanently!
Key Tax & Financial Issues to Consider
In this article, we’ll outline below some of the key tax and financial differences between the Australian and Singaporean systems below for you. This information is intended to be general information only in order to provide you a basic overview of the issues. If you require detailed information we recommend that you seek advice from appropriately qualified advisors.
The issues that we’ll discuss are as follows:
- Becoming a Tax Resident
- Timing of the financial years for each country
- Personal Tax Rates
- Taxes on Employment Income & Deductions
- Capital Gains Tax & Taxes on Investment Income
- Taxes on Dividend Received
- Superannuation & Retirement
- Running a Company
- Company Taxes
- Goods & Services Tax (GST)
- Property Taxes
Becoming a Tax Resident
To become a resident of Singapore for Singaporean tax purposes as an Australian, you need to have spent more than 183 days in Singapore in a year. Besides, this condition is subject to other available administrative concessions. However, if an Australian leaves for Singapore, he or she will likely remain a resident of Australia, except if their intent is to remain in Singapore permanently or for longer than two years.
Financial Years
For each country, the tax years differs as follows:
- for Australia the tax year runs from 1st July through to 30th June, whereas,
- for Singapore, the tax year runs from 1st January through to 31st December
Tax Authorities
For Australia, the government department responsible for the administration of the tax system and for the collection of tax revenue, is the Australia: Australian Taxation Office (ATO).
For Singapore the Inland Revenue Authority of Singapore (IRAS), is responsible for the collection of taxes and administration of Singapore’s taxation system.
Personal Income Tax Rates
In Australia, resident taxpayers are not only subject to taxation on worldwide income, they’re also subject to a very high rates of tax ranging from 0% for incomes under AUD $18,400 right up to 47% (including a 2% medicare levy) for incomes that exceed AUD $180,000.
Non-residents for Australian taxation purposes are also subject to very high rates of tax, albeit, only from Australian sourced income, or from gains on taxable Australian property (principally Australian real estate). For non-residents, the tax rates start at 32.5% for income up to AUD $120,000, 37% for income between AUD $120,001 to AUD $180,000 right up to a tax rate of 45% for Australian income greater than AUD $180,000!!
In Singapore, the rates are much more reasonable with progressive rates starting from 0%, increasing to a maximum of only 22% with that latter rate only applying to income earned above SGD $320,000. For non-residents, the tax rates are also fair, ranging from between 15% and 22%.
Taxes on Employment Income & Deductions
In Australia, tax on wages is managed through the Pay As You Go Withholding (PAYGW) system. This allows your employer to withhold tax from your regular salary and remit it to the ATO on your behalf.
Your tax is then assessed annually via the lodgement of your Australian taxation return. The PAYGW tax remitted to the ATO on your behalf through the year is available as a ta credit and is used to offset your annual assessed tax. The result of that process si that you’ll generally receive a small refund or have a small balancing amount of tax payable to close out the year.
However, in Singapore, the reverse is the case. Your employer will pay your salary to you in full each pay period (i.e. you will receive your total gross salary each pay period with no taxes deducted).
Similar to Australia, you’ll then be required to lodge an annual taxation return to declare your total income earned for the year, albeit without any tax credits to offset the total tax payable (as no tax was deducted throughout the year). This means that you will have to pay your total tax for the year in full, shortly after your return has been lodged for the year.
Thus, you should take care to keep track of your estimated tax liability and set aside money each month to in order to pay your tax at the end of the year. Please note that if you are living in Singapore as a resident, you can choose to pay your tax for the first time in your second year via a monthly instalment system.
In Australia, if you incur some work related expenses, you can claim those expenses as a deduction and thus reduce your taxable income. In Singapore however, Singaporean tax laws do not allow employees to claim tax deductions. Therefore, if you do bear any work related expenses yourself you should seek reimbursement of those costs from your employer directly, so that you are not out of pocket!
Capital Gains Tax & Taxes on Investment Income
In Australia, not only is your employment income taxable, your dividends and investment income is taxable and capital gains that you make on the disposal of assets is also taxable!
Note that as an Australian, you are taxed on most capital assets (property, shares, etc) that you sell, and upon changing residency, you may also be required to pay capital gains tax on the deemed disposal of some of your assets, despite not having actually sold those assets. It’s a complex area that requires some experience to determine what is the right strategy for you, so be sure to seek advice!
Bear in mind that ceasing residency in Australia will also cause some of Australia’s popular CGT concessions to be lost also! For example, the main residence CGT exemption is not available to non-residents, and the 50% CGT discount (applicable when a resident makes a gain on the sale of an asset that they held for 12 months) is also not available from the date that the person ceased their Australian tax residency status!
Contrast that with Singapore, where no capital gains tax is levied at all!
Taxes on Dividend Received
In Australia, you pay tax on dividend income according to your individual marginal tax rate. However, as a tax resident, you can also use franking credits from dividends received (tax paid by the company on their profits) to reduce your tax payable on the dividend received by you. As a non-resident, your franked dividends won’t be assessable in Australia, and you won’t be able to use those franking credits to reduce other tax payable at all.
Additionally, as a non-resident for Australian taxation purposes, a 15% Non-Resident Withholding Tax will apply to other dividends (e.g. unfranked dividends) received by you, and a 10% Non-Resident Withholding Tax will apply to any Australian interest income earned by you.
Singapore on the other hand has a single tier taxation system when it comes to company profits paid to shareholders as dividends. In short this means that the company is required to pay company tax on it’s taxable profits. Any dividend that is then subsequently paid out to it’s shareholders is not taxed in the hands of the shareholders at all – it is simply not taxable (as the income was already taxed in the hands of the company paying the dividend).
In a situation in which the shareholder is a non-resident for Singaporean tax purposes, Singaporean tax is not payable. However, the shareholder may be taxed in their country of residence (assuming that country taxes dividends as ordinary income). In that instance, no foreign tax credit would be available to offset the tax payable in the home country, as no tax would have been paid by the shareholder in Singapore.
Superannuation & Retirement
As an Australian expat, you will be familiar with Australia’s superannuation system already. In Australia, your employer is required to make superannuation contributions equal to 9.5% of your salary to your superannuation fund; an amount that is meant to fund your eventual retirement. Your accumulated superannuation balance is for the purpose of retirement and as such, can only released once you reach your retirement age.
In the case of Singapore, the retirement fund is known as Central Provident Fund (CPF). It covers Singaporeans and permanent residents. The difference is that the fund is for a retirement cash payout and also to save for housing and healthcare in retirement.
For most Australian expats, CPF won’t be practically available. So if you wish to keep building your retirement savings you may wish to consider voluntarily contributing some of your savings into your Australian superannuation fund whilst you live and work in Singapore. Many will be surprised that this is possible, but we can assure you, this is definitely possible. Your change of residency status does not inhibit your ability to contribute into superannuation whilst you live overseas.
In Australia, employees receive Superannuation Guarantee payments directly into their personal super fund at up to 9.5% of their earnings, with capped limits.
For Singaporean employees (aged above 18 and who earn greater than SGD$450 per month), contributions into CPF are made on their behalf by their employer.
In Singapore, contributions to CPF are mandatory for both employers AND employees. The amounts that are required to be contributed depend upon the employee’s age and also upon their income. To view the current rates (as of December 2020), take a look at the CPF Contributions Rate Table published by the Central Provident Fund Board.
Running a company
If you are an Australian who is planning to run a company in Singapore, you should familiarise yourself with the various rules governing the establishment and ongoing management of the company, including compliance obligations.
The government authority that regulates Singapore companies Singapore corporate law, public accountants and corporate service providers is the Accounting and Corporate Regulatory Authority (ACRA). Their website is very user-friendly and helpful, so be sure to take a look and familiarise yourself with their Starting a Business information (located in the top-menu of their website).
Some key points to note about incorporating a company in Singapore are:
- Directors – must be aged over 18yrs, and must be either a Singapore Citizen, a Singapore Permanent Resident or an EntrePass holder. Note that Employment Pass holders can also be directors, subject to obtaining a Letter of Approval from the Ministry of Manpower.
- Company Secretary – A company secretary must be a person who is a local Singaporean resident. The company secretary must be appointed within 6 months of incorporation, and if your company is a sole director company, the company secretary cannot be the same person.
- Shareholders – Singaporean companies must have at least one shareholder and the minimum issued capital must be at least $1.
- Registered Office – The registered office must be located at an address Singapore and it must be operational and accessible to the public during normal office hours. The registered office is where Singaporean authorities and others will send mail, notices and other communications, and this address is where the company’s corporate register and records must be kept.
- Audit – Most medium to large companies incorporated in Singapore are required to be audited, however small companies are exempt from the requirement to be audited. Your company will meet the definition of a ‘small company’ if:
- it is a private company, and
- for the past two consecutive financial years, it met two of the following 3 criteria:
- total annual revenue of $10m or less;
- total assets of $10m or less;
- total number of employees of 50 or less.
Company Tax
The corporate tax rate in Singapore for 2021 and onwards is a very reasonable, flat rate of tax of 17%. In addition to a low rate of corporate tax Singapore also, allows qualifying new start-up companies exemptions from tax on their income for the first three years of operation as follows:
Tax Exemption on First $200,000 of taxable income
- 75% exemption on the first $100,000 of normal chargeable income; and
- A further 50% exemption on the next $100,000 of normal chargeable income.
Tax Exemption on First $300,000 of taxable income
- 100% exemption on the first $100,000 of taxable income; and
- A further 50% exemption on the next $200,000 of taxable income.
Beyond the first three years, your company will be eligible for a ‘partial exemption’ that is available to all companies generally as follows:
Partial Tax Exemption Available to Companies Generally
- 75% exemption on the first $10,000 of taxable income; and
- A further 50% exemption on the next $190,000 of taxable income.
As you can see, not only are Singapore’s personal income tax rates very, very reasonable, so to are Singapore’s corporate rates!
Australia’s company tax rates on the other hand, are as follows:
- For small companies (i.e. base rate entities) the company tax rate is 26% for 2021 (and 25% for 2022 onwards), and,
- for all other companies the company tax rate is 30%.
Important to note however, is that unlike Singapore, Australia does not provide any notable exemptions from tax, or reduction in rates at all.
So, as you can see, Singapore really is an attractive place to build a business and to live and work!
Goods and Services Tax (GST)
Both Australia and Singapore levy GST on the goods and services sold by businesses. In Singapore, GST is 7% and must be charged on all sales (excluding financial services, sales and lease of residential property and digital payment tokens).
In contrast, Australia levies GST at the rate of 10% and there is a wider range of exemptions (including residential rent, financial supplies, eduction, and some primary essentials like medicines and raw food).
Property Taxes
Singapore has a centralised property taxation system and the basic rate for owner-occupied residential properties ranges from 4% right up to 16%.
For commercial, industrial, and residential properties that are tenanted, the rate is 10%. These rates apply to the yearly value of the property and such valuations depend on the market appraisal of your land as well as the estimated value of other properties in terms of rent.
In Australia, the system for property taxation includes the following: other property taxes on real estates, land value taxes, water rates, stamp duties, etc. However, each state has a different rate and payment terms.
Summary
Although Australia and Singapore have similar tax and corporate systems, in our view, Singapore is a very appealing country to live, work and build a business in.
Without getting into the lifestyle benefits of living and working in Singapore, when it comes to paying taxes or operating a business, Singapore definitely has the edge over Australia.
Overall, Singapore has lower tax rates, does not levy Capital Gains Tax, does not tax dividends in the hands of shareholders, has low corporate tax rates, attractive start-up tax exemptions and ongoing tax exemptions, and on top of all that, Singapore’s tax and corporate rules a significantly less complex than Australia’s, resulting in far less bureaucratic and corporate red tape for you to deal with.
If you’re an Australian who is considering becoming an expat and moving to Singapore, do your research and make sure you have a comprehensive understanding of your personal situation as a Singapore tax resident. You should also ensure that you understand the Australian taxation consequences of moving to Singapore also.
On that note, we highly recommend that you seek advice from a highly experienced, professional expatriate tax advisors to assist you to structure your move tax-effectively and efficiently so that you maximise the opportunity of moving to Singapore!
For further reading on this topic, take a look at Singapore tax brief for Australian expats.
If you would like to speak to one of our Expat Taxes team for an ‘Outbound Expat’ consultation, or to book a different consultation, navigate to our ‘Book an Appointment’ page and book an appointment via our online booking form, or alternatively, contact us today!
Founded in 2007 and with clients located in 90 countries around the globe at last count, we’ve been advising Australian expats about Australian and international taxation issues for over 14 years, so we’re well placed to assist.
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